Correlation Between WEC Energy and Dow Jones
Can any of the company-specific risk be diversified away by investing in both WEC 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 WEC 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 WEC Energy Group and Dow Jones Industrial, you can compare the effects of market volatilities on WEC 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 WEC Energy with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of WEC Energy and Dow Jones.
Diversification Opportunities for WEC Energy and Dow Jones
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between WEC and Dow is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding WEC Energy Group 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 WEC 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 WEC Energy Group 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 WEC Energy i.e., WEC Energy and Dow Jones go up and down completely randomly.
Pair Corralation between WEC Energy and Dow Jones
Assuming the 90 days horizon WEC Energy Group is expected to generate 1.56 times more return on investment than Dow Jones. However, WEC Energy is 1.56 times more volatile than Dow Jones Industrial. It trades about 0.09 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.1 per unit of risk. If you would invest 7,212 in WEC Energy Group on September 12, 2024 and sell it today you would earn a total of 1,928 from holding WEC Energy Group or generate 26.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.41% |
| Values | Daily Returns |
WEC Energy Group vs. Dow Jones Industrial
Performance |
| Timeline |
WEC Energy and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
WEC Energy Group
Pair trading matchups for WEC Energy
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with WEC Energy and Dow Jones
The main advantage of trading using opposite WEC Energy and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WEC 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.| WEC Energy vs. Nippon Steel | WEC Energy vs. ALGOMA STEEL GROUP | WEC Energy vs. ITALIAN WINE BRANDS | WEC Energy vs. RELIANCE STEEL AL |
| Dow Jones vs. Aeye Inc | Dow Jones vs. Gentex | Dow Jones vs. Marine Products | Dow Jones vs. CarsalesCom Ltd ADR |
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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