Correlation Between Dow Jones and Callon Petroleum

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

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

Diversification Opportunities for Dow Jones and Callon Petroleum

0.0

Correlation Coefficient

Dow Jones  Callon Petroleum

Pay attention - limited upside

The 3 months correlation between Dow and Callon is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Callon Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Callon Petroleum and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with Callon Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Callon Petroleum has no effect on the direction of Dow Jones i.e., Dow Jones and Callon Petroleum go up and down completely randomly.

Pair Corralation between Dow Jones and Callon Petroleum

If you would invest (100.00) in Callon Petroleum on November 28, 2024 and sell it today you would earn a total of  100.00  from holding Callon Petroleum or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Dow Jones Industrial  vs.  Callon Petroleum

Pair Trading with Dow Jones and Callon Petroleum

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

The idea behind Dow Jones Industrial and Callon Petroleum 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.