Correlation Between Dow Jones and Target
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Target 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 Target 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 Target, you can compare the effects of market volatilities on Dow Jones and Target 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 Target. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Target.
Diversification Opportunities for Dow Jones and Target
Very good diversification
The 3 months correlation between Dow and Target is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target 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 Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target has no effect on the direction of Dow Jones i.e., Dow Jones and Target go up and down completely randomly.
Pair Corralation between Dow Jones and Target
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.28 times more return on investment than Target. However, Dow Jones Industrial is 3.57 times less risky than Target. It trades about 0.07 of its potential returns per unit of risk. Target is currently generating about 0.02 per unit of risk. If you would invest 3,391,085 in Dow Jones Industrial on October 5, 2024 and sell it today you would earn a total of 848,142 from holding Dow Jones Industrial or generate 25.01% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 92.12% |
Values | Daily Returns |
Dow Jones Industrial vs. Target
Performance |
Timeline |
Dow Jones and Target Volatility Contrast
Predicted Return Density |
Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Target
Pair trading matchups for Target
Pair Trading with Dow Jones and Target
The main advantage of trading using opposite Dow Jones and Target positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Target 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 Target will offset losses from the drop in Target's long position.Dow Jones vs. Coty Inc | Dow Jones vs. The Coca Cola | Dow Jones vs. Celsius Holdings | Dow Jones vs. PepsiCo |
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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 the CEOs Directory module to screen CEOs from public companies around the world.
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