Correlation Between ZOZO and Dow Jones
Can any of the company-specific risk be diversified away by investing in both ZOZO 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 ZOZO and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ZOZO Inc and Dow Jones Industrial, you can compare the effects of market volatilities on ZOZO 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 ZOZO with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of ZOZO and Dow Jones.
Diversification Opportunities for ZOZO and Dow Jones
Very poor diversification
The 3 months correlation between ZOZO and Dow is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding ZOZO Inc 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 ZOZO 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 ZOZO Inc 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 ZOZO i.e., ZOZO and Dow Jones go up and down completely randomly.
Pair Corralation between ZOZO and Dow Jones
Assuming the 90 days horizon ZOZO Inc is expected to under-perform the Dow Jones. But the pink sheet apears to be less risky and, when comparing its historical volatility, ZOZO Inc is 3.25 times less risky than Dow Jones. The pink sheet trades about -0.5 of its potential returns per unit of risk. The Dow Jones Industrial is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 4,211,440 in Dow Jones Industrial on August 26, 2024 and sell it today you would earn a total of 218,211 from holding Dow Jones Industrial or generate 5.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 18.18% |
| Values | Daily Returns |
ZOZO Inc vs. Dow Jones Industrial
Performance |
| Timeline |
ZOZO and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
ZOZO Inc
Pair trading matchups for ZOZO
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with ZOZO and Dow Jones
The main advantage of trading using opposite ZOZO and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ZOZO 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.| ZOZO vs. China Tontine Wines | ZOZO vs. Topbuild Corp | ZOZO vs. Vodka Brands Corp | ZOZO vs. Celsius Holdings |
| Dow Jones vs. MI Homes | Dow Jones vs. Franklin Street Properties | Dow Jones vs. Summit Hotel Properties | Dow Jones vs. Portillos |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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