Correlation Between Atlas America and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Atlas America 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 Atlas America and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Atlas America and Dow Jones Industrial, you can compare the effects of market volatilities on Atlas America 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 Atlas America with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Atlas America and Dow Jones.
Diversification Opportunities for Atlas America and Dow Jones
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Atlas and Dow is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Atlas America 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 Atlas America 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 Atlas America 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 Atlas America i.e., Atlas America and Dow Jones go up and down completely randomly.
Pair Corralation between Atlas America and Dow Jones
Given the investment horizon of 90 days Atlas America is expected to generate 2.97 times less return on investment than Dow Jones. But when comparing it to its historical volatility, Atlas America is 3.44 times less risky than Dow Jones. It trades about 0.18 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 3,870,327 in Dow Jones Industrial on November 3, 2024 and sell it today you would earn a total of 584,139 from holding Dow Jones Industrial or generate 15.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 38.4% |
| Values | Daily Returns |
Atlas America vs. Dow Jones Industrial
Performance |
| Timeline |
Atlas America and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Atlas America
Pair trading matchups for Atlas America
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Atlas America and Dow Jones
The main advantage of trading using opposite Atlas America and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Atlas America 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.| Atlas America vs. MFS Active Exchange | Atlas America vs. First Trust Exchange Traded | Atlas America vs. Vanguard Intermediate Term Treasury | Atlas America vs. Vanguard Long Term Treasury |
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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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