Correlation Between Oak Ridge and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Oak Ridge 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 Oak Ridge and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oak Ridge Dividend and Dow Jones Industrial, you can compare the effects of market volatilities on Oak Ridge 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 Oak Ridge with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oak Ridge and Dow Jones.
Diversification Opportunities for Oak Ridge and Dow Jones
Very poor diversification
The 3 months correlation between Oak and Dow is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Oak Ridge Dividend 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 Oak Ridge 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 Oak Ridge Dividend 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 Oak Ridge i.e., Oak Ridge and Dow Jones go up and down completely randomly.
Pair Corralation between Oak Ridge and Dow Jones
Assuming the 90 days horizon Oak Ridge is expected to generate 1.25 times less return on investment than Dow Jones. But when comparing it to its historical volatility, Oak Ridge Dividend is 2.86 times less risky than Dow Jones. It trades about 0.27 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 3,383,361 in Dow Jones Industrial on August 31, 2024 and sell it today you would earn a total of 1,107,704 from holding Dow Jones Industrial or generate 32.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.73% |
| Values | Daily Returns |
Oak Ridge Dividend vs. Dow Jones Industrial
Performance |
| Timeline |
Oak Ridge and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Oak Ridge Dividend
Pair trading matchups for Oak Ridge
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Oak Ridge and Dow Jones
The main advantage of trading using opposite Oak Ridge and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oak Ridge 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.| Oak Ridge vs. Legg Mason Partners | Oak Ridge vs. Champlain Mid Cap | Oak Ridge vs. Small Midcap Dividend Income | Oak Ridge vs. Nationwide Growth Fund |
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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