Correlation Between ROK Resources and Dow Jones
Can any of the company-specific risk be diversified away by investing in both ROK Resources 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 ROK Resources and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ROK Resources and Dow Jones Industrial, you can compare the effects of market volatilities on ROK Resources 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 ROK Resources with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of ROK Resources and Dow Jones.
Diversification Opportunities for ROK Resources and Dow Jones
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between ROK and Dow is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding ROK Resources 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 ROK Resources 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 ROK Resources 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 ROK Resources i.e., ROK Resources and Dow Jones go up and down completely randomly.
Pair Corralation between ROK Resources and Dow Jones
Assuming the 90 days horizon ROK Resources is expected to under-perform the Dow Jones. In addition to that, ROK Resources is 7.27 times more volatile than Dow Jones Industrial. It trades about -0.01 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.08 per unit of volatility. If you would invest 3,347,646 in Dow Jones Industrial on August 30, 2024 and sell it today you would earn a total of 1,124,560 from holding Dow Jones Industrial or generate 33.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 81.62% |
| Values | Daily Returns |
ROK Resources vs. Dow Jones Industrial
Performance |
| Timeline |
ROK Resources and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
ROK Resources
Pair trading matchups for ROK Resources
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with ROK Resources and Dow Jones
The main advantage of trading using opposite ROK Resources and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ROK Resources 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.| ROK Resources vs. Legacy Education | ROK Resources vs. Apple Inc | ROK Resources vs. NVIDIA | ROK Resources vs. Microsoft |
| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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