Correlation Between High Arctic and Dow Jones
Can any of the company-specific risk be diversified away by investing in both High Arctic 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 High Arctic and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between High Arctic Energy and Dow Jones Industrial, you can compare the effects of market volatilities on High Arctic 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 High Arctic with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of High Arctic and Dow Jones.
Diversification Opportunities for High Arctic and Dow Jones
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between High and Dow is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding High Arctic Energy 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 High Arctic 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 High Arctic Energy 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 High Arctic i.e., High Arctic and Dow Jones go up and down completely randomly.
Pair Corralation between High Arctic and Dow Jones
Assuming the 90 days horizon High Arctic Energy is expected to under-perform the Dow Jones. In addition to that, High Arctic is 2.19 times more volatile than Dow Jones Industrial. It trades about -0.07 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about -0.16 per unit of volatility. If you would invest 4,488,213 in Dow Jones Industrial on December 1, 2024 and sell it today you would lose (104,122) from holding Dow Jones Industrial or give up 2.32% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
High Arctic Energy vs. Dow Jones Industrial
Performance |
| Timeline |
High Arctic and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
High Arctic Energy
Pair trading matchups for High Arctic
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with High Arctic and Dow Jones
The main advantage of trading using opposite High Arctic and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if High Arctic 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.| High Arctic vs. TerraVest Industries | High Arctic vs. Enterprise Group | High Arctic vs. Total Energy Services | High Arctic vs. Trican Well Service |
| Dow Jones vs. Cannae Holdings | Dow Jones vs. Fidus Investment Corp | Dow Jones vs. SEI Investments | Dow Jones vs. Cracker Barrel Old |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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