Correlation Between Dow Jones and Southern Petrochemicals
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Southern Petrochemicals 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 Southern Petrochemicals 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 Southern Petrochemicals Industries, you can compare the effects of market volatilities on Dow Jones and Southern Petrochemicals 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 Southern Petrochemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Southern Petrochemicals.
Diversification Opportunities for Dow Jones and Southern Petrochemicals
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dow and Southern is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Southern Petrochemicals Indust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Petrochemicals 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 Southern Petrochemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Petrochemicals has no effect on the direction of Dow Jones i.e., Dow Jones and Southern Petrochemicals go up and down completely randomly.
Pair Corralation between Dow Jones and Southern Petrochemicals
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.5 times more return on investment than Southern Petrochemicals. However, Dow Jones Industrial is 2.02 times less risky than Southern Petrochemicals. It trades about -0.27 of its potential returns per unit of risk. Southern Petrochemicals Industries is currently generating about -0.15 per unit of risk. If you would invest 4,491,065 in Dow Jones Industrial on September 30, 2024 and sell it today you would lose (191,844) from holding Dow Jones Industrial or give up 4.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Dow Jones Industrial vs. Southern Petrochemicals Indust
Performance |
| Timeline |
Dow Jones and Southern Petrochemicals Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Southern Petrochemicals Industries
Pair trading matchups for Southern Petrochemicals
Pair Trading with Dow Jones and Southern Petrochemicals
The main advantage of trading using opposite Dow Jones and Southern Petrochemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Southern Petrochemicals 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 Southern Petrochemicals will offset losses from the drop in Southern Petrochemicals' long position.| Dow Jones vs. Dana Inc | Dow Jones vs. Wabash National | Dow Jones vs. BRP Inc | Dow Jones vs. ArcelorMittal SA ADR |
| Southern Petrochemicals vs. NMDC Limited | Southern Petrochemicals vs. Steel Authority of | Southern Petrochemicals vs. Embassy Office Parks | Southern Petrochemicals vs. Gujarat Narmada Valley |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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