Correlation Between Dow Jones and ENEOS Holdings

Can any of the company-specific risk be diversified away by investing in both Dow Jones and ENEOS Holdings 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 ENEOS Holdings 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 ENEOS Holdings, you can compare the effects of market volatilities on Dow Jones and ENEOS Holdings 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 ENEOS Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and ENEOS Holdings.

Diversification Opportunities for Dow Jones and ENEOS Holdings

0.33

Correlation Coefficient

Dow Jones  ENEOS Holdings

Weak diversification

The 3 months correlation between Dow and ENEOS is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and ENEOS Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENEOS Holdings 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 ENEOS Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENEOS Holdings has no effect on the direction of Dow Jones i.e., Dow Jones and ENEOS Holdings go up and down completely randomly.

Pair Corralation between Dow Jones and ENEOS Holdings

Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.31 times more return on investment than ENEOS Holdings. However, Dow Jones Industrial is 3.24 times less risky than ENEOS Holdings. It trades about 0.13 of its potential returns per unit of risk. ENEOS Holdings is currently generating about 0.03 per unit of risk. If you would invest  3,877,810  in Dow Jones Industrial on September 14, 2024 and sell it today you would earn a total of  513,602  from holding Dow Jones Industrial or generate 13.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.9%
Values	Daily Returns

Dow Jones Industrial  vs.  ENEOS Holdings

Pair Trading with Dow Jones and ENEOS Holdings

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

The idea behind Dow Jones Industrial and ENEOS Holdings 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.