Correlation Between Oil Gas and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Oil Gas and Dow Jones 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 Oil Gas and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oil Gas Ultrasector and Dow Jones Industrial, you can compare the effects of market volatilities on Oil Gas and Dow Jones 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 Oil Gas with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oil Gas and Dow Jones.
Diversification Opportunities for Oil Gas and Dow Jones
Very poor diversification
The 3 months correlation between Oil and Dow is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Oil Gas Ultrasector and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and Oil Gas 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 Oil Gas Ultrasector are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Oil Gas i.e., Oil Gas and Dow Jones go up and down completely randomly.
Pair Corralation between Oil Gas and Dow Jones
Assuming the 90 days horizon Oil Gas Ultrasector is expected to generate 1.81 times more return on investment than Dow Jones. However, Oil Gas is 1.81 times more volatile than Dow Jones Industrial. It trades about 0.24 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.25 per unit of risk. If you would invest 4,307 in Oil Gas Ultrasector on August 29, 2024 and sell it today you would earn a total of 413.00 from holding Oil Gas Ultrasector or generate 9.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Oil Gas Ultrasector vs. Dow Jones Industrial
Performance |
| Timeline |
Oil Gas and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Oil Gas Ultrasector
Pair trading matchups for Oil Gas
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Oil Gas and Dow Jones
The main advantage of trading using opposite Oil Gas and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oil Gas position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Oil Gas vs. Precious Metals Ultrasector | Oil Gas vs. Real Estate Ultrasector | Oil Gas vs. Basic Materials Ultrasector | Oil Gas vs. Utilities Ultrasector Profund |
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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 Stocks Directory module to find actively traded stocks across global markets.
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