Correlation Between Diversified Energy and IShares Dow

Can any of the company-specific risk be diversified away by investing in both Diversified Energy and IShares Dow 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 Diversified Energy and IShares Dow into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Diversified Energy and iShares Dow Jones, you can compare the effects of market volatilities on Diversified Energy and IShares Dow 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 Diversified Energy with a short position of IShares Dow. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diversified Energy and IShares Dow.

Diversification Opportunities for Diversified Energy and IShares Dow

-0.29

Correlation Coefficient

Diversified Energy  IShares Dow

Very good diversification

The 3 months correlation between Diversified and IShares is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Diversified Energy and iShares Dow Jones in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Dow Jones and Diversified 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 Diversified Energy are associated (or correlated) with IShares Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Dow Jones has no effect on the direction of Diversified Energy i.e., Diversified Energy and IShares Dow go up and down completely randomly.

Pair Corralation between Diversified Energy and IShares Dow

Assuming the 90 days trading horizon Diversified Energy is expected to under-perform the IShares Dow. In addition to that, Diversified Energy is 3.51 times more volatile than iShares Dow Jones. It trades about -0.08 of its total potential returns per unit of risk. iShares Dow Jones is currently generating about -0.01 per unit of volatility. If you would invest  7,509  in iShares Dow Jones on December 1, 2024 and sell it today you would lose (61.00) from holding iShares Dow Jones or give up 0.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Diversified Energy  vs.  iShares Dow Jones

Diversified Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Diversified Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

iShares Dow Jones

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Dow Jones has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, IShares Dow is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Diversified Energy and IShares Dow

The main advantage of trading using opposite Diversified Energy and IShares Dow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diversified Energy position performs unexpectedly, IShares Dow 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 IShares Dow will offset losses from the drop in IShares Dow's long position.

The idea behind Diversified Energy and iShares Dow Jones pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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.