Correlation Between Dow Jones and City Retail
Can any of the company-specific risk be diversified away by investing in both Dow Jones and City Retail 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 City Retail 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 City Retail Developments, you can compare the effects of market volatilities on Dow Jones and City Retail 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 City Retail. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and City Retail.
Diversification Opportunities for Dow Jones and City Retail
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Dow and City is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and City Retail Developments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City Retail Developments 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 City Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of City Retail Developments has no effect on the direction of Dow Jones i.e., Dow Jones and City Retail go up and down completely randomly.
Pair Corralation between Dow Jones and City Retail
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.8 times more return on investment than City Retail. However, Dow Jones is 1.8 times more volatile than City Retail Developments. It trades about 0.34 of its potential returns per unit of risk. City Retail Developments is currently generating about 0.0 per unit of risk. If you would invest 4,205,219 in Dow Jones Industrial on September 2, 2024 and sell it today you would earn a total of 285,846 from holding Dow Jones Industrial or generate 6.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. City Retail Developments
Performance |
| Timeline |
Dow Jones and City Retail Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
City Retail Developments
Pair trading matchups for City Retail
Pair Trading with Dow Jones and City Retail
The main advantage of trading using opposite Dow Jones and City Retail positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, City Retail 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 City Retail will offset losses from the drop in City Retail's long position.| Dow Jones vs. Dream Finders Homes | Dow Jones vs. GEN Restaurant Group, | Dow Jones vs. National Beverage Corp | Dow Jones vs. BJs Restaurants |
| City Retail vs. Lippo Cikarang Tbk | City Retail vs. Lippo Karawaci Tbk | City Retail vs. Mitra Pinasthika Mustika | City Retail vs. Jakarta Int Hotels |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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