Correlation Between Dow Jones and Sky Petroleum
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Sky Petroleum at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Dow Jones and Sky Petroleum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Sky Petroleum, you can compare the effects of market volatilities on Dow Jones and Sky Petroleum and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Dow Jones with a short position of Sky Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Sky Petroleum.
Diversification Opportunities for Dow Jones and Sky Petroleum
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Dow and Sky is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Sky Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sky Petroleum and Dow Jones is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Dow Jones Industrial are associated (or correlated) with Sky Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sky Petroleum has no effect on the direction of Dow Jones i.e., Dow Jones and Sky Petroleum go up and down completely randomly.
Pair Corralation between Dow Jones and Sky Petroleum
Assuming the 90 days trading horizon Dow Jones is expected to generate 103.3 times less return on investment than Sky Petroleum. But when comparing it to its historical volatility, Dow Jones Industrial is 101.19 times less risky than Sky Petroleum. It trades about 0.08 of its potential returns per unit of risk. Sky Petroleum is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 0.01 in Sky Petroleum on October 16, 2024 and sell it today you would earn a total of 0.01 from holding Sky Petroleum or generate 100.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.58% |
| Values | Daily Returns |
Dow Jones Industrial vs. Sky Petroleum
Performance |
| Timeline |
Dow Jones and Sky Petroleum Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Sky Petroleum
Pair trading matchups for Sky Petroleum
Pair Trading with Dow Jones and Sky Petroleum
The main advantage of trading using opposite Dow Jones and Sky Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Sky Petroleum can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Sky Petroleum will offset losses from the drop in Sky Petroleum's long position.| Dow Jones vs. LB Foster | Dow Jones vs. Definitive Healthcare Corp | Dow Jones vs. TFI International | Dow Jones vs. Ryanair Holdings PLC |
| Sky Petroleum vs. Strat Petroleum | Sky Petroleum vs. Imperial Res | Sky Petroleum vs. Cgrowth Capital | Sky Petroleum vs. Pantheon Resources Plc |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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