Correlation Between Short Oil and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Short 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 Short 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 Short Oil Gas and Dow Jones Industrial, you can compare the effects of market volatilities on Short 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 Short Oil with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short Oil and Dow Jones.
Diversification Opportunities for Short Oil and Dow Jones
Pay attention - limited upside
The 3 months correlation between Short and Dow is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Short Oil Gas 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 Short 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 Short Oil Gas 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 Short Oil i.e., Short Oil and Dow Jones go up and down completely randomly.
Pair Corralation between Short Oil and Dow Jones
Assuming the 90 days horizon Short Oil Gas is expected to under-perform the Dow Jones. In addition to that, Short Oil is 1.58 times more volatile than Dow Jones Industrial. It trades about -0.02 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.16 per unit of volatility. If you would invest 3,857,103 in Dow Jones Industrial on August 30, 2024 and sell it today you would earn a total of 615,103 from holding Dow Jones Industrial or generate 15.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Short Oil Gas vs. Dow Jones Industrial
Performance |
| Timeline |
Short Oil and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Short Oil Gas
Pair trading matchups for Short Oil
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Short Oil and Dow Jones
The main advantage of trading using opposite Short Oil and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Short 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.| Short Oil vs. Short Real Estate | Short Oil vs. Short Real Estate | Short Oil vs. Ultrashort Mid Cap Profund | Short Oil vs. Ultrashort Mid Cap Profund |
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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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