Correlation Between Dow Jones and Ross Stores
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Ross Stores 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 Ross Stores 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 Ross Stores, you can compare the effects of market volatilities on Dow Jones and Ross Stores 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 Ross Stores. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Ross Stores.
Diversification Opportunities for Dow Jones and Ross Stores
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dow and Ross is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Ross Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ross Stores 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 Ross Stores. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ross Stores has no effect on the direction of Dow Jones i.e., Dow Jones and Ross Stores go up and down completely randomly.
Pair Corralation between Dow Jones and Ross Stores
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.55 times more return on investment than Ross Stores. However, Dow Jones Industrial is 1.81 times less risky than Ross Stores. It trades about 0.08 of its potential returns per unit of risk. Ross Stores is currently generating about 0.04 per unit of risk. If you would invest 3,359,634 in Dow Jones Industrial on August 27, 2024 and sell it today you would earn a total of 1,070,017 from holding Dow Jones Industrial or generate 31.85% 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. Ross Stores
Performance |
| Timeline |
Dow Jones and Ross Stores Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Ross Stores
Pair trading matchups for Ross Stores
Pair Trading with Dow Jones and Ross Stores
The main advantage of trading using opposite Dow Jones and Ross Stores positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Ross Stores 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 Ross Stores will offset losses from the drop in Ross Stores' long position.| Dow Jones vs. Meiwu Technology Co | Dow Jones vs. 17 Education Technology | Dow Jones vs. 51Talk Online Education | Dow Jones vs. Afya |
| Ross Stores vs. Burlington Stores | Ross Stores vs. American Eagle Outfitters | Ross Stores vs. Lululemon Athletica | Ross Stores vs. Foot Locker |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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