Correlation Between Dow Jones and Select Medical
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Select Medical 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 Select Medical 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 Select Medical Holdings, you can compare the effects of market volatilities on Dow Jones and Select Medical 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 Select Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Select Medical.
Diversification Opportunities for Dow Jones and Select Medical
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and Select is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Select Medical Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Medical Holdings 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 Select Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Medical Holdings has no effect on the direction of Dow Jones i.e., Dow Jones and Select Medical go up and down completely randomly.
Pair Corralation between Dow Jones and Select Medical
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.93 times less return on investment than Select Medical. But when comparing it to its historical volatility, Dow Jones Industrial is 3.05 times less risky than Select Medical. It trades about 0.1 of its potential returns per unit of risk. Select Medical Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,496 in Select Medical Holdings on August 24, 2024 and sell it today you would earn a total of 1,471 from holding Select Medical Holdings or generate 58.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Select Medical Holdings
Performance |
| Timeline |
Dow Jones and Select Medical Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Select Medical Holdings
Pair trading matchups for Select Medical
Pair Trading with Dow Jones and Select Medical
The main advantage of trading using opposite Dow Jones and Select Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Select Medical 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 Select Medical will offset losses from the drop in Select Medical's long position.| Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. Perseus Mining Limited | Dow Jones vs. Titan Machinery | Dow Jones vs. Simon Property Group |
| Select Medical vs. The Ensign Group | Select Medical vs. Encompass Health Corp | Select Medical vs. InnovAge Holding Corp | Select Medical vs. Enhabit |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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