Correlation Between Target and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Target 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 Target and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Target Group and Dow Jones Industrial, you can compare the effects of market volatilities on Target 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 Target with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Target and Dow Jones.
Diversification Opportunities for Target and Dow Jones
Significant diversification
The 3 months correlation between Target and Dow is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Target Group 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 Target 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 Target Group 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 Target i.e., Target and Dow Jones go up and down completely randomly.
Pair Corralation between Target and Dow Jones
Given the investment horizon of 90 days Target Group is expected to generate 31.12 times more return on investment than Dow Jones. However, Target is 31.12 times more volatile than Dow Jones Industrial. It trades about 0.09 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.08 per unit of risk. If you would invest 0.75 in Target Group on August 26, 2024 and sell it today you would lose (0.51) from holding Target Group or give up 68.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Target Group vs. Dow Jones Industrial
Performance |
| Timeline |
Target and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Target Group
Pair trading matchups for Target
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Target and Dow Jones
The main advantage of trading using opposite Target and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Target 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.| Target vs. Green Cures Botanical | Target vs. Galexxy Holdings | Target vs. Indoor Harvest Corp | Target vs. Speakeasy Cannabis Club |
| Dow Jones vs. Vistra Energy Corp | Dow Jones vs. Fluence Energy | Dow Jones vs. Old Republic International | Dow Jones vs. Empresa Distribuidora y |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities |