Correlation Between Shoprite Holdings and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Shoprite Holdings and Dow Jones 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 Shoprite Holdings and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shoprite Holdings Limited and Dow Jones Industrial, you can compare the effects of market volatilities on Shoprite Holdings and Dow Jones 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 Shoprite Holdings with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shoprite Holdings and Dow Jones.
Diversification Opportunities for Shoprite Holdings and Dow Jones
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Shoprite and Dow is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Shoprite Holdings Limited and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and Shoprite Holdings 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 Shoprite Holdings Limited are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Shoprite Holdings i.e., Shoprite Holdings and Dow Jones go up and down completely randomly.
Pair Corralation between Shoprite Holdings and Dow Jones
Assuming the 90 days horizon Shoprite Holdings Limited is expected to generate 4.77 times more return on investment than Dow Jones. However, Shoprite Holdings is 4.77 times more volatile than Dow Jones Industrial. It trades about 0.14 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.16 per unit of risk. If you would invest 860.00 in Shoprite Holdings Limited on September 1, 2024 and sell it today you would earn a total of 690.00 from holding Shoprite Holdings Limited or generate 80.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 96.18% |
| Values | Daily Returns |
Shoprite Holdings Limited vs. Dow Jones Industrial
Performance |
| Timeline |
Shoprite Holdings and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Shoprite Holdings Limited
Pair trading matchups for Shoprite Holdings
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Shoprite Holdings and Dow Jones
The main advantage of trading using opposite Shoprite Holdings and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shoprite Holdings position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Shoprite Holdings vs. AIR PRODCHEMICALS | Shoprite Holdings vs. PTT Global Chemical | Shoprite Holdings vs. Silicon Motion Technology | Shoprite Holdings vs. BRIT AMER TOBACCO |
| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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