Correlation Between Golden Ocean and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Golden Ocean 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 Golden Ocean and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Golden Ocean Group and Dow Jones Industrial, you can compare the effects of market volatilities on Golden Ocean 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 Golden Ocean with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Golden Ocean and Dow Jones.
Diversification Opportunities for Golden Ocean and Dow Jones
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Golden and Dow is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Golden Ocean Group 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 Golden Ocean 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 Golden Ocean Group 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 Golden Ocean i.e., Golden Ocean and Dow Jones go up and down completely randomly.
Pair Corralation between Golden Ocean and Dow Jones
Assuming the 90 days trading horizon Golden Ocean Group is expected to generate 3.25 times more return on investment than Dow Jones. However, Golden Ocean is 3.25 times more volatile than Dow Jones Industrial. It trades about 0.09 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.16 per unit of risk. If you would invest 7,501 in Golden Ocean Group on August 25, 2024 and sell it today you would earn a total of 4,799 from holding Golden Ocean Group or generate 63.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Golden Ocean Group vs. Dow Jones Industrial
Performance |
| Timeline |
Golden Ocean and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Golden Ocean Group
Pair trading matchups for Golden Ocean
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Golden Ocean and Dow Jones
The main advantage of trading using opposite Golden Ocean and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Golden Ocean 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.| Golden Ocean vs. Frontline | Golden Ocean vs. BW LPG | Golden Ocean vs. Jinhui Shipping and | Golden Ocean vs. FLEX LNG |
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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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