Correlation Between Dow Jones and ROHM Co

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

Diversification Opportunities for Dow Jones and ROHM Co

0.92

Correlation Coefficient

Dow Jones  ROHM Co

Almost no diversification

The 3 months correlation between Dow and ROHM is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and ROHM Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ROHM Co 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 ROHM Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ROHM Co has no effect on the direction of Dow Jones i.e., Dow Jones and ROHM Co go up and down completely randomly.

Pair Corralation between Dow Jones and ROHM Co

Assuming the 90 days trading horizon Dow Jones is expected to generate 3.23 times less return on investment than ROHM Co. But when comparing it to its historical volatility, Dow Jones Industrial is 3.01 times less risky than ROHM Co. It trades about 0.24 of its potential returns per unit of risk. ROHM Co is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  750.00  in ROHM Co on April 23, 2025 and sell it today you would earn a total of  329.00  from holding ROHM Co or generate 43.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	96.83%
Values	Daily Returns

Dow Jones Industrial  vs.  ROHM Co

Pair Trading with Dow Jones and ROHM Co

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

The idea behind Dow Jones Industrial and ROHM Co 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.