Correlation Between Olin and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Olin 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 Olin and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Olin Corporation and Dow Jones Industrial, you can compare the effects of market volatilities on Olin 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 Olin with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Olin and Dow Jones.
Diversification Opportunities for Olin and Dow Jones
Weak diversification
The 3 months correlation between Olin and Dow is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Olin Corp. 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 Olin 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 Olin Corporation 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 Olin i.e., Olin and Dow Jones go up and down completely randomly.
Pair Corralation between Olin and Dow Jones
Considering the 90-day investment horizon Olin is expected to generate 2.01 times less return on investment than Dow Jones. In addition to that, Olin is 2.25 times more volatile than Dow Jones Industrial. It trades about 0.04 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.17 per unit of volatility. If you would invest 4,234,224 in Dow Jones Industrial on October 20, 2024 and sell it today you would earn a total of 114,559 from holding Dow Jones Industrial or generate 2.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Olin Corp. vs. Dow Jones Industrial
Performance |
| Timeline |
Olin and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Olin Corporation
Pair trading matchups for Olin
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Olin and Dow Jones
The main advantage of trading using opposite Olin and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Olin 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.| Olin vs. Select Energy Services | Olin vs. Westlake Chemical | Olin vs. Sensient Technologies | Olin vs. Axalta Coating Systems |
| Dow Jones vs. SkyWest | Dow Jones vs. Air Transport Services | Dow Jones vs. LATAM Airlines Group | Dow Jones vs. Emerson Radio |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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