Correlation Between Emerging Markets and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Emerging Markets 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 Emerging Markets and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Emerging Markets and Dow Jones Industrial, you can compare the effects of market volatilities on Emerging Markets 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 Emerging Markets with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerging Markets and Dow Jones.
Diversification Opportunities for Emerging Markets and Dow Jones
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Emerging and Dow is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding The Emerging Markets 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 Emerging Markets 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 The Emerging Markets 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 Emerging Markets i.e., Emerging Markets and Dow Jones go up and down completely randomly.
Pair Corralation between Emerging Markets and Dow Jones
Assuming the 90 days horizon The Emerging Markets is expected to under-perform the Dow Jones. But the mutual fund apears to be less risky and, when comparing its historical volatility, The Emerging Markets is 1.09 times less risky than Dow Jones. The mutual fund trades about -0.18 of its potential returns per unit of risk. The Dow Jones Industrial is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 4,205,219 in Dow Jones Industrial on September 2, 2024 and sell it today you would earn a total of 285,846 from holding Dow Jones Industrial or generate 6.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Emerging Markets vs. Dow Jones Industrial
Performance |
| Timeline |
Emerging Markets and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
The Emerging Markets
Pair trading matchups for Emerging Markets
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Emerging Markets and Dow Jones
The main advantage of trading using opposite Emerging Markets and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerging Markets 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.| Emerging Markets vs. The Eafe Pure | Emerging Markets vs. The Long Term | Emerging Markets vs. Baillie Gifford International | Emerging Markets vs. Baillie Gifford International |
| Dow Jones vs. Dream Finders Homes | Dow Jones vs. GEN Restaurant Group, | Dow Jones vs. National Beverage Corp | Dow Jones vs. BJs Restaurants |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
Other Complementary Tools
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets |