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
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and Ross is 0.67. 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 under-perform the Ross Stores. But the index apears to be less risky and, when comparing its historical volatility, Dow Jones Industrial is 1.01 times less risky than Ross Stores. The index trades about -0.06 of its potential returns per unit of risk. The Ross Stores is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 11,280 in Ross Stores on January 14, 2025 and sell it today you would earn a total of 1,224 from holding Ross Stores or generate 10.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| 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. Guangdong Investment Limited | Dow Jones vs. Presidio Property Trust | Dow Jones vs. Comstock Holding Companies | Dow Jones vs. Old Republic International |
| Ross Stores vs. MOVIE GAMES SA | Ross Stores vs. Easy Software AG | Ross Stores vs. UNIVMUSIC GRPADR050 | Ross Stores vs. WILLIS LEASE FIN |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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