Correlation Between PBF Energy and DOW JONES

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Can any of the company-specific risk be diversified away by investing in both PBF 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 PBF 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 PBF Energy and DOW JONES INDUSTRIAL, you can compare the effects of market volatilities on PBF 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 PBF Energy with a short position of DOW JONES. Check out your portfolio center. Please also check ongoing floating volatility patterns of PBF Energy and DOW JONES.

Diversification Opportunities for PBF Energy and DOW JONES

0.36
  Correlation Coefficient

Weak diversification

The 3 months correlation between PBF Energy and DOW JONES is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding PBF Energy 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 PBF 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 PBF Energy 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 PBF Energy i.e., PBF Energy and DOW JONES go up and down completely randomly.
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Pair Corralation between PBF Energy and DOW JONES

Considering the 90-day investment horizon PBF Energy is expected to generate 4.52 times more return on investment than DOW JONES. However, PBF Energy is 4.52 times more volatile than DOW JONES INDUSTRIAL. It trades about 0.08 of its potential returns per unit of risk. DOW JONES INDUSTRIAL is currently generating about 0.02 per unit of risk. If you would invest  1,031  in PBF Energy on October 29, 2022 and sell it today you would earn a total of  2,684  from holding PBF Energy or generate 260.33% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy98.57%
ValuesDaily Returns

PBF Energy  vs.  DOW JONES INDUSTRIAL

 Performance (%) 
       Timeline  

PBF Energy and DOW JONES Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with PBF Energy and DOW JONES

The main advantage of trading using opposite PBF Energy and DOW JONES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PBF 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's long position.
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The idea behind PBF Energy and DOW JONES INDUSTRIAL 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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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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