Correlation Between STEP Energy and Dow Jones
Can any of the company-specific risk be diversified away by investing in both STEP Energy 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 STEP Energy and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STEP Energy Services and Dow Jones Industrial, you can compare the effects of market volatilities on STEP Energy 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 STEP Energy with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of STEP Energy and Dow Jones.
Diversification Opportunities for STEP Energy and Dow Jones
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between STEP and Dow is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding STEP Energy Services 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 STEP Energy 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 STEP Energy Services 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 STEP Energy i.e., STEP Energy and Dow Jones go up and down completely randomly.
Pair Corralation between STEP Energy and Dow Jones
Assuming the 90 days horizon STEP Energy Services is expected to generate 4.97 times more return on investment than Dow Jones. However, STEP Energy is 4.97 times more volatile than Dow Jones Industrial. It trades about 0.02 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 365.00 in STEP Energy Services on September 2, 2024 and sell it today you would earn a total of 0.00 from holding STEP Energy Services or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
STEP Energy Services vs. Dow Jones Industrial
Performance |
| Timeline |
STEP Energy and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
STEP Energy Services
Pair trading matchups for STEP Energy
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with STEP Energy and Dow Jones
The main advantage of trading using opposite STEP Energy and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STEP Energy 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.| STEP Energy vs. Total Energy Services | STEP Energy vs. Trican Well Service | STEP Energy vs. Koil Energy Solutions | STEP Energy vs. TerraVest Industries |
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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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