Correlation Between Essential Utilities and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Essential Utilities 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 Essential Utilities and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Essential Utilities and Dow Jones Industrial, you can compare the effects of market volatilities on Essential Utilities 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 Essential Utilities with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Essential Utilities and Dow Jones.
Diversification Opportunities for Essential Utilities and Dow Jones
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Essential and Dow is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Essential Utilities 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 Essential Utilities 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 Essential Utilities 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 Essential Utilities i.e., Essential Utilities and Dow Jones go up and down completely randomly.
Pair Corralation between Essential Utilities and Dow Jones
Given the investment horizon of 90 days Essential Utilities is expected to generate 3.02 times less return on investment than Dow Jones. In addition to that, Essential Utilities is 2.1 times more volatile than Dow Jones Industrial. It trades about 0.02 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.12 per unit of volatility. If you would invest 4,529,581 in Dow Jones Industrial on September 1, 2025 and sell it today you would earn a total of 242,061 from holding Dow Jones Industrial or generate 5.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.44% |
| Values | Daily Returns |
Essential Utilities vs. Dow Jones Industrial
Performance |
| Timeline |
Essential Utilities and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Essential Utilities
Pair trading matchups for Essential Utilities
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Essential Utilities and Dow Jones
The main advantage of trading using opposite Essential Utilities and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Essential Utilities 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' long position.| Essential Utilities vs. Flutter Entertainment plc | Essential Utilities vs. First Foods Group | Essential Utilities vs. Active Health Foods | Essential Utilities vs. Panache Beverage |
| Dow Jones vs. DATA Communications Management | Dow Jones vs. Altair Corp | Dow Jones vs. Corsair Gaming | Dow Jones vs. On4 Communications |
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 the Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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