Correlation Between PHLX Oil and Dow Jones
Can any of the company-specific risk be diversified away by investing in both PHLX Oil 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 PHLX Oil and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PHLX Oil Service and Dow Jones Industrial, you can compare the effects of market volatilities on PHLX Oil 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 PHLX Oil with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of PHLX Oil and Dow Jones.
Diversification Opportunities for PHLX Oil and Dow Jones
Very weak diversification
The 3 months correlation between PHLX and Dow is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding PHLX Oil Service 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 PHLX Oil 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 PHLX Oil Service 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 PHLX Oil i.e., PHLX Oil and Dow Jones go up and down completely randomly.
Pair Corralation between PHLX Oil and Dow Jones
Assuming the 90 days trading horizon PHLX Oil Service is expected to under-perform the Dow Jones. In addition to that, PHLX Oil is 2.37 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 0.1 per unit of volatility. If you would invest 3,888,426 in Dow Jones Industrial on November 3, 2024 and sell it today you would earn a total of 566,040 from holding Dow Jones Industrial or generate 14.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.46% |
| Values | Daily Returns |
PHLX Oil Service vs. Dow Jones Industrial
Performance |
| Timeline |
PHLX Oil and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
PHLX Oil Service
Pair trading matchups for PHLX Oil
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with PHLX Oil and Dow Jones
The main advantage of trading using opposite PHLX Oil and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PHLX Oil 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.| PHLX Oil vs. Universal Music Group | PHLX Oil vs. Harmony Gold Mining | PHLX Oil vs. Summit Materials | PHLX Oil vs. Perseus Mining Limited |
| Dow Jones vs. Cincinnati Financial | Dow Jones vs. Kellanova | Dow Jones vs. Acme United | Dow Jones vs. Procter Gamble |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
Other Complementary Tools
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings |