Correlation Between Vaneck Oil and DOW

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Vaneck Oil and 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 Vaneck Oil and DOW into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vaneck Oil Services and DOW, you can compare the effects of market volatilities on Vaneck Oil and 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 Vaneck Oil with a short position of DOW. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vaneck Oil and DOW.

Diversification Opportunities for Vaneck Oil and DOW

0.28
  Correlation Coefficient

Modest diversification

The 3 months correlation between Vaneck and DOW is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Vaneck Oil Services and DOW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DOW and Vaneck Oil 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 Vaneck Oil Services are associated (or correlated) with DOW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DOW has no effect on the direction of Vaneck Oil i.e., Vaneck Oil and DOW go up and down completely randomly.
    Optimize

Pair Corralation between Vaneck Oil and DOW

Considering the 90-day investment horizon Vaneck Oil Services is expected to generate 4.08 times more return on investment than DOW. However, Vaneck Oil is 4.08 times more volatile than DOW. It trades about 0.15 of its potential returns per unit of risk. DOW is currently generating about 0.39 per unit of risk. If you would invest  21,989  in Vaneck Oil Services on May 21, 2022 and sell it today you would earn a total of  2,126  from holding Vaneck Oil Services or generate 9.67% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Vaneck Oil Services  vs.  DOW

 Performance (%) 
       Timeline  

Vaneck Oil and DOW Volatility Contrast

   Predicted Return Density   
       Returns  

Vaneck Oil Services

Pair trading matchups for Vaneck Oil

DOW

Pair trading matchups for DOW

The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against DOW as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. DOW's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, DOW's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to DOW.

Pair Trading with Vaneck Oil and DOW

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

Vaneck Oil Services

Pair trading matchups for Vaneck Oil

The idea behind Vaneck Oil Services and DOW 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.

DOW

Pair trading matchups for DOW

The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against DOW as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. DOW's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, DOW's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to DOW.
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 Stock Screener module to find equities using custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..

Other Complementary Tools

Pair Correlation
Compare performance and examine fundamental relationship between any two equity instruments
Go
Idea Analyzer
Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas
Go
Sync Your Broker
Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors.
Go
Portfolio File Import
Quickly import all of your third-party portfolios from your local drive in csv format
Go
Pattern Recognition
Use different Pattern Recognition models to time the market across multiple global exchanges
Go
Competition Analyzer
Analyze and compare many basic indicators for a group of related or unrelated entities
Go
Stock Tickers
Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites
Go
Bond Directory
Find actively traded corporate debentures issued by US companies
Go
Insider Screener
Find insiders across different sectors to evaluate their impact on performance
Go
Options Analysis
Analyze and evaluate options and option chains as a potential hedge for your portfolios
Go
Equity Analysis
Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities
Go