Correlation Between Dow Jones and CJ Seafood

Can any of the company-specific risk be diversified away by investing in both Dow Jones and CJ Seafood 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 CJ Seafood 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 CJ Seafood Corp, you can compare the effects of market volatilities on Dow Jones and CJ Seafood 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 CJ Seafood. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and CJ Seafood.

Diversification Opportunities for Dow Jones and CJ Seafood

-0.71

Correlation Coefficient

Dow Jones  CJ Seafood

Pay attention - limited upside

The 3 months correlation between Dow and 011155 is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and CJ Seafood Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CJ Seafood Corp 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 CJ Seafood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CJ Seafood Corp has no effect on the direction of Dow Jones i.e., Dow Jones and CJ Seafood go up and down completely randomly.

Pair Corralation between Dow Jones and CJ Seafood

Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.46 times more return on investment than CJ Seafood. However, Dow Jones Industrial is 2.17 times less risky than CJ Seafood. It trades about 0.19 of its potential returns per unit of risk. CJ Seafood Corp is currently generating about -0.14 per unit of risk. If you would invest  4,097,497  in Dow Jones Industrial on September 4, 2024 and sell it today you would earn a total of  380,703  from holding Dow Jones Industrial or generate 9.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	93.65%
Values	Daily Returns

Dow Jones Industrial  vs.  CJ Seafood Corp

Pair Trading with Dow Jones and CJ Seafood

The main advantage of trading using opposite Dow Jones and CJ Seafood positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, CJ Seafood 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 CJ Seafood will offset losses from the drop in CJ Seafood's long position.

The idea behind Dow Jones Industrial and CJ Seafood Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Stocks Directory module to find actively traded stocks across global markets.