Correlation Between DOW and Marcus Corp

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both DOW and Marcus Corp 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 and Marcus Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DOW and Marcus Corp, you can compare the effects of market volatilities on DOW and Marcus Corp 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 with a short position of Marcus Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of DOW and Marcus Corp.

Diversification Opportunities for DOW and Marcus Corp

0.7
  Correlation Coefficient

Poor diversification

The 3 months correlation between DOW and Marcus is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding DOW and Marcus Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marcus Corp and DOW 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 are associated (or correlated) with Marcus Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marcus Corp has no effect on the direction of DOW i.e., DOW and Marcus Corp go up and down completely randomly.
    Optimize

Pair Corralation between DOW and Marcus Corp

Given the investment horizon of 90 days DOW is expected to generate 3.11 times less return on investment than Marcus Corp. But when comparing it to its historical volatility, DOW is 2.24 times less risky than Marcus Corp. It trades about 0.03 of its potential returns per unit of risk. Marcus Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,171  in Marcus Corp on September 1, 2022 and sell it today you would earn a total of  432.00  from holding Marcus Corp or generate 36.89% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

DOW  vs.  Marcus Corp

 Performance (%) 
       Timeline  

DOW and Marcus Corp Volatility Contrast

   Predicted Return Density   
       Returns  

DOW

Pair trading matchups for DOW

The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against DOW as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. DOW's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, DOW's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to DOW.

Pair Trading with DOW and Marcus Corp

The main advantage of trading using opposite DOW and Marcus Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DOW position performs unexpectedly, Marcus Corp 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 Marcus Corp will offset losses from the drop in Marcus Corp's long position.
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against DOW as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. DOW's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, DOW's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to DOW.
The idea behind DOW and Marcus 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.
Marcus Corp vs. Industrias Bachoco SA
Marcus Corp vs. Sirius XM Holdings
Marcus Corp vs. Walt Disney
Marcus Corp vs. Netflix
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

Other Complementary Tools

Equity Analysis
Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities
Go
Premium Stories
Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope
Go
Insider Screener
Find insiders across different sectors to evaluate their impact on performance
Go
Watchlist Optimization
Optimize watchlists to build efficient portfolio or rebalance existing positions based on mean-variance optimization algorithm
Go
Options Analysis
Analyze and evaluate options and option chains as a potential hedge for your portfolios
Go
Analyst Recommendations
Analyst recommendations and target price estimates broken down by several categories
Go
Premium Stories
Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope
Go
Global Markets Map
Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes
Go
Volatility Analysis
Get historical volatility and risk analysis based on latest market data
Go