Correlation Between Dow Jones and DOLLAR TREE
Can any of the company-specific risk be diversified away by investing in both Dow Jones and DOLLAR TREE 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 DOLLAR TREE 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 DOLLAR TREE, you can compare the effects of market volatilities on Dow Jones and DOLLAR TREE 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 DOLLAR TREE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and DOLLAR TREE.
Diversification Opportunities for Dow Jones and DOLLAR TREE
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dow and DOLLAR is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and DOLLAR TREE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DOLLAR TREE 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 DOLLAR TREE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DOLLAR TREE has no effect on the direction of Dow Jones i.e., Dow Jones and DOLLAR TREE go up and down completely randomly.
Pair Corralation between Dow Jones and DOLLAR TREE
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.29 times more return on investment than DOLLAR TREE. However, Dow Jones Industrial is 3.41 times less risky than DOLLAR TREE. It trades about 0.21 of its potential returns per unit of risk. DOLLAR TREE is currently generating about 0.05 per unit of risk. If you would invest 4,237,436 in Dow Jones Industrial on August 25, 2024 and sell it today you would earn a total of 192,215 from holding Dow Jones Industrial or generate 4.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. DOLLAR TREE
Performance |
| Timeline |
Dow Jones and DOLLAR TREE Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
DOLLAR TREE
Pair trading matchups for DOLLAR TREE
Pair Trading with Dow Jones and DOLLAR TREE
The main advantage of trading using opposite Dow Jones and DOLLAR TREE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, DOLLAR TREE 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 DOLLAR TREE will offset losses from the drop in DOLLAR TREE's long position.| Dow Jones vs. Vistra Energy Corp | Dow Jones vs. Fluence Energy | Dow Jones vs. Old Republic International | Dow Jones vs. Empresa Distribuidora y |
| DOLLAR TREE vs. Goodyear Tire Rubber | DOLLAR TREE vs. APPLIED MATERIALS | DOLLAR TREE vs. National Health Investors | DOLLAR TREE vs. Bumrungrad Hospital Public |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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