Correlation Between Natural Gas and Mini Dow
Can any of the company-specific risk be diversified away by investing in both Natural Gas and Mini Dow 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 Natural Gas and Mini Dow into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Natural Gas and Mini Dow Jones, you can compare the effects of market volatilities on Natural Gas and Mini Dow 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 Natural Gas with a short position of Mini Dow. Check out your portfolio center. Please also check ongoing floating volatility patterns of Natural Gas and Mini Dow.
Diversification Opportunities for Natural Gas and Mini Dow
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Natural and Mini is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Natural Gas and Mini Dow Jones in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mini Dow Jones and Natural 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 Natural Gas are associated (or correlated) with Mini Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mini Dow Jones has no effect on the direction of Natural Gas i.e., Natural Gas and Mini Dow go up and down completely randomly.
Pair Corralation between Natural Gas and Mini Dow
Assuming the 90 days horizon Natural Gas is expected to generate 6.53 times more return on investment than Mini Dow. However, Natural Gas is 6.53 times more volatile than Mini Dow Jones. It trades about 0.11 of its potential returns per unit of risk. Mini Dow Jones is currently generating about 0.12 per unit of risk. If you would invest 255.00 in Natural Gas on August 25, 2024 and sell it today you would earn a total of 58.00 from holding Natural Gas or generate 22.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Natural Gas vs. Mini Dow Jones
Performance |
| Timeline |
| Natural Gas |
| Mini Dow Jones |
Natural Gas and Mini Dow Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Natural Gas and Mini Dow
The main advantage of trading using opposite Natural Gas and Mini Dow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Natural Gas position performs unexpectedly, Mini Dow 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 Mini Dow will offset losses from the drop in Mini Dow's long position.| Natural Gas vs. Soybean Meal Futures | Natural Gas vs. Coffee | Natural Gas vs. Sugar | Natural Gas vs. 10 Year T Note Futures |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
Other Complementary Tools
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| CEOs Directory Screen CEOs from public companies around the world |