Correlation Between May Department and Dow Jones

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

Diversification Opportunities for May Department and Dow Jones

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between May and Dow is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding May Department Stores 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 May Department 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 May Department Stores 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 May Department i.e., May Department and Dow Jones go up and down completely randomly.
    Optimize

Pair Corralation between May Department and Dow Jones

If you would invest  3,494,547  in Dow Jones Industrial on October 11, 2024 and sell it today you would earn a total of  768,973  from holding Dow Jones Industrial or generate 22.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy0.0%
ValuesDaily Returns

May Department Stores  vs.  Dow Jones Industrial

 Performance 
       Timeline  

May Department and Dow Jones Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with May Department and Dow Jones

The main advantage of trading using opposite May Department and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if May Department 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.
The idea behind May Department Stores 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.
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

Other Complementary Tools

Sign In To Macroaxis
Sign in to explore Macroaxis' wealth optimization platform and fintech modules
Portfolio Rebalancing
Analyze risk-adjusted returns against different time horizons to find asset-allocation targets
Options Analysis
Analyze and evaluate options and option chains as a potential hedge for your portfolios
Fundamental Analysis
View fundamental data based on most recent published financial statements
Volatility Analysis
Get historical volatility and risk analysis based on latest market data