Correlation Between Dow Jones and Marks
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Marks 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 Marks 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 Marks and Spencer, you can compare the effects of market volatilities on Dow Jones and Marks 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 Marks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Marks.
Diversification Opportunities for Dow Jones and Marks
Poor diversification
The 3 months correlation between Dow and Marks is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Marks and Spencer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marks and Spencer 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 Marks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marks and Spencer has no effect on the direction of Dow Jones i.e., Dow Jones and Marks go up and down completely randomly.
Pair Corralation between Dow Jones and Marks
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.9 times less return on investment than Marks. But when comparing it to its historical volatility, Dow Jones Industrial is 2.48 times less risky than Marks. It trades about 0.15 of its potential returns per unit of risk. Marks and Spencer is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 361.00 in Marks and Spencer on September 5, 2024 and sell it today you would earn a total of 108.00 from holding Marks and Spencer or generate 29.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 96.9% |
| Values | Daily Returns |
Dow Jones Industrial vs. Marks and Spencer
Performance |
| Timeline |
Dow Jones and Marks Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Marks and Spencer
Pair trading matchups for Marks
Pair Trading with Dow Jones and Marks
The main advantage of trading using opposite Dow Jones and Marks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Marks 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 Marks will offset losses from the drop in Marks' long position.| Dow Jones vs. Shake Shack | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. Dave Busters Entertainment | Dow Jones vs. Meli Hotels International |
| Marks vs. CarsalesCom | Marks vs. MAVEN WIRELESS SWEDEN | Marks vs. Entravision Communications | Marks vs. TRADEGATE |
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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