Correlation Between Petrofac and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Petrofac 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 Petrofac and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Petrofac Ltd ADR and Dow Jones Industrial, you can compare the effects of market volatilities on Petrofac 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 Petrofac with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petrofac and Dow Jones.
Diversification Opportunities for Petrofac and Dow Jones
Excellent diversification
The 3 months correlation between Petrofac and Dow is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Petrofac Ltd ADR 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 Petrofac 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 Petrofac Ltd ADR 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 Petrofac i.e., Petrofac and Dow Jones go up and down completely randomly.
Pair Corralation between Petrofac and Dow Jones
Assuming the 90 days horizon Petrofac Ltd ADR is expected to generate 52.03 times more return on investment than Dow Jones. However, Petrofac is 52.03 times more volatile than Dow Jones Industrial. It trades about 0.03 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.08 per unit of risk. If you would invest 48.00 in Petrofac Ltd ADR on August 28, 2024 and sell it today you would lose (42.00) from holding Petrofac Ltd ADR or give up 87.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Petrofac Ltd ADR vs. Dow Jones Industrial
Performance |
| Timeline |
Petrofac and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Petrofac Ltd ADR
Pair trading matchups for Petrofac
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Petrofac and Dow Jones
The main advantage of trading using opposite Petrofac and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petrofac 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.| Petrofac vs. Expro Group Holdings | Petrofac vs. ChampionX | Petrofac vs. Ranger Energy Services | Petrofac vs. Cactus Inc |
| Dow Jones vs. Meiwu Technology Co | Dow Jones vs. 17 Education Technology | Dow Jones vs. 51Talk Online Education | Dow Jones vs. Afya |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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