Correlation Between Roche Holding and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Roche Holding 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 Roche Holding and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Roche Holding AG and Dow Jones Industrial, you can compare the effects of market volatilities on Roche Holding 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 Roche Holding with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Roche Holding and Dow Jones.
Diversification Opportunities for Roche Holding and Dow Jones
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Roche and Dow is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Roche Holding AG 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 Roche Holding 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 Roche Holding AG 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 Roche Holding i.e., Roche Holding and Dow Jones go up and down completely randomly.
Pair Corralation between Roche Holding and Dow Jones
Assuming the 90 days trading horizon Roche Holding AG is expected to under-perform the Dow Jones. In addition to that, Roche Holding is 1.1 times more volatile than Dow Jones Industrial. It trades about -0.38 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.26 per unit of volatility. If you would invest 4,238,757 in Dow Jones Industrial on August 27, 2024 and sell it today you would earn a total of 234,900 from holding Dow Jones Industrial or generate 5.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Roche Holding AG vs. Dow Jones Industrial
Performance |
| Timeline |
Roche Holding and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Roche Holding AG
Pair trading matchups for Roche Holding
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Roche Holding and Dow Jones
The main advantage of trading using opposite Roche Holding and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Roche Holding 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.| Roche Holding vs. Nestl SA | Roche Holding vs. Zurich Insurance Group | Roche Holding vs. Swiss Re AG | Roche Holding vs. UBS Group AG |
| Dow Jones vs. Meiwu Technology Co | Dow Jones vs. 17 Education Technology | Dow Jones vs. 51Talk Online Education | Dow Jones vs. Afya |
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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