Correlation Between International Petroleum and Dow Jones
Can any of the company-specific risk be diversified away by investing in both International Petroleum 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 International Petroleum and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Petroleum and Dow Jones Industrial, you can compare the effects of market volatilities on International Petroleum 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 International Petroleum with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Petroleum and Dow Jones.
Diversification Opportunities for International Petroleum and Dow Jones
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between International and Dow is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding International Petroleum 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 International Petroleum 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 International Petroleum 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 International Petroleum i.e., International Petroleum and Dow Jones go up and down completely randomly.
Pair Corralation between International Petroleum and Dow Jones
Assuming the 90 days trading horizon International Petroleum is expected to generate 1.46 times less return on investment than Dow Jones. In addition to that, International Petroleum is 3.04 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 3,394,710 in Dow Jones Industrial on August 26, 2024 and sell it today you would earn a total of 1,034,941 from holding Dow Jones Industrial or generate 30.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
International Petroleum vs. Dow Jones Industrial
Performance |
| Timeline |
International Petroleum and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
International Petroleum
Pair trading matchups for International Petroleum
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with International Petroleum and Dow Jones
The main advantage of trading using opposite International Petroleum and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Petroleum 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.| International Petroleum vs. Africa Oil Corp | International Petroleum vs. International Petroleum Corp | International Petroleum vs. Lundin Mining |
| Dow Jones vs. MI Homes | Dow Jones vs. Franklin Street Properties | Dow Jones vs. Summit Hotel Properties | Dow Jones vs. Portillos |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
Other Complementary Tools
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance |