Correlation Between New Energy and Dow Jones
Can any of the company-specific risk be diversified away by investing in both New Energy 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 New Energy and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Energy Metals and Dow Jones Industrial, you can compare the effects of market volatilities on New Energy 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 New Energy with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Energy and Dow Jones.
Diversification Opportunities for New Energy and Dow Jones
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between New and Dow is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding New Energy Metals 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 New Energy 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 New Energy Metals 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 New Energy i.e., New Energy and Dow Jones go up and down completely randomly.
Pair Corralation between New Energy and Dow Jones
Assuming the 90 days horizon New Energy Metals is expected to generate 304.95 times more return on investment than Dow Jones. However, New Energy is 304.95 times more volatile than Dow Jones Industrial. It trades about 0.21 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.17 per unit of risk. If you would invest 19.00 in New Energy Metals on October 23, 2024 and sell it today you would earn a total of 1.00 from holding New Energy Metals or generate 5.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 90.0% |
| Values | Daily Returns |
New Energy Metals vs. Dow Jones Industrial
Performance |
| Timeline |
New Energy and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
New Energy Metals
Pair trading matchups for New Energy
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with New Energy and Dow Jones
The main advantage of trading using opposite New Energy and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Energy 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.| New Energy vs. flyExclusive, | New Energy vs. Sunlands Technology Group | New Energy vs. Finnair Oyj | New Energy vs. Broadleaf Co |
| Dow Jones vs. Grupo Televisa SAB | Dow Jones vs. NiSource | Dow Jones vs. Kinetik Holdings | Dow Jones vs. Empresa Distribuidora y |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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