Correlation Between SPASX 200 and Dow Jones
Can any of the company-specific risk be diversified away by investing in both SPASX 200 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 SPASX 200 and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPASX 200 VIX and Dow Jones Industrial, you can compare the effects of market volatilities on SPASX 200 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 SPASX 200 with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPASX 200 and Dow Jones.
Diversification Opportunities for SPASX 200 and Dow Jones
Very good diversification
The 3 months correlation between SPASX and Dow is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding SPASX 200 VIX 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 SPASX 200 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 SPASX 200 VIX 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 SPASX 200 i.e., SPASX 200 and Dow Jones go up and down completely randomly.
Pair Corralation between SPASX 200 and Dow Jones
Assuming the 90 days trading horizon SPASX 200 VIX is expected to generate 14.13 times more return on investment than Dow Jones. However, SPASX 200 is 14.13 times more volatile than Dow Jones Industrial. It trades about 0.03 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.27 per unit of risk. If you would invest 1,186 in SPASX 200 VIX on August 30, 2024 and sell it today you would lose (105.00) from holding SPASX 200 VIX or give up 8.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPASX 200 VIX vs. Dow Jones Industrial
Performance |
| Timeline |
SPASX 200 and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
SPASX 200 VIX
Pair trading matchups for SPASX 200
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with SPASX 200 and Dow Jones
The main advantage of trading using opposite SPASX 200 and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPASX 200 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.| SPASX 200 vs. EMvision Medical Devices | SPASX 200 vs. Actinogen Medical | SPASX 200 vs. Fisher Paykel Healthcare | SPASX 200 vs. EVE Health Group |
| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
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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