Correlation Between Fuel Tech and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Fuel Tech 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 Fuel Tech and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fuel Tech and Dow Jones Industrial, you can compare the effects of market volatilities on Fuel Tech 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 Fuel Tech with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fuel Tech and Dow Jones.
Diversification Opportunities for Fuel Tech and Dow Jones
Weak diversification
The 3 months correlation between Fuel and Dow is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Fuel Tech 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 Fuel Tech 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 Fuel Tech 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 Fuel Tech i.e., Fuel Tech and Dow Jones go up and down completely randomly.
Pair Corralation between Fuel Tech and Dow Jones
Given the investment horizon of 90 days Fuel Tech is expected to under-perform the Dow Jones. In addition to that, Fuel Tech is 3.66 times more volatile than Dow Jones Industrial. It trades about -0.02 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.08 per unit of volatility. If you would invest 3,371,709 in Dow Jones Industrial on October 20, 2024 and sell it today you would earn a total of 977,074 from holding Dow Jones Industrial or generate 28.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Fuel Tech vs. Dow Jones Industrial
Performance |
| Timeline |
Fuel Tech and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Fuel Tech
Pair trading matchups for Fuel Tech
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Fuel Tech and Dow Jones
The main advantage of trading using opposite Fuel Tech and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fuel Tech 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.| Fuel Tech vs. Federal Signal | Fuel Tech vs. CECO Environmental Corp | Fuel Tech vs. Zurn Elkay Water | Fuel Tech vs. Greenlane Renewables |
| Dow Jones vs. Aluminum of | Dow Jones vs. Adtalem Global Education | Dow Jones vs. East Africa Metals | Dow Jones vs. Western Copper and |
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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