Correlation Between Dow Jones and Short Oil
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Short Oil 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 Short Oil 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 Short Oil Gas, you can compare the effects of market volatilities on Dow Jones and Short Oil 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 Short Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Short Oil.
Diversification Opportunities for Dow Jones and Short Oil
Excellent diversification
The 3 months correlation between Dow and Short is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Short Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Oil Gas 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 Short Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Oil Gas has no effect on the direction of Dow Jones i.e., Dow Jones and Short Oil go up and down completely randomly.
Pair Corralation between Dow Jones and Short Oil
Assuming the 90 days trading horizon Dow Jones Industrial is expected to under-perform the Short Oil. But the index apears to be less risky and, when comparing its historical volatility, Dow Jones Industrial is 2.25 times less risky than Short Oil. The index trades about -0.21 of its potential returns per unit of risk. The Short Oil Gas is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,253 in Short Oil Gas on November 28, 2024 and sell it today you would earn a total of 12.00 from holding Short Oil Gas or generate 0.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Dow Jones Industrial vs. Short Oil Gas
Performance |
| Timeline |
Dow Jones and Short Oil Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Short Oil Gas
Pair trading matchups for Short Oil
Pair Trading with Dow Jones and Short Oil
The main advantage of trading using opposite Dow Jones and Short Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Short Oil 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 Short Oil will offset losses from the drop in Short Oil's long position.| Dow Jones vs. Gladstone Investment | Dow Jones vs. BW Offshore Limited | Dow Jones vs. Fidus Investment Corp | Dow Jones vs. Aperture Health |
| Short Oil vs. Hsbc Funds | Short Oil vs. T Rowe Price | Short Oil vs. Aig Government Money | Short Oil vs. Pace Select Advisors |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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