Correlation Between ETF Series and Dow Jones
Can any of the company-specific risk be diversified away by investing in both ETF Series 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 ETF Series and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ETF Series Solutions and Dow Jones Industrial, you can compare the effects of market volatilities on ETF Series 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 ETF Series with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETF Series and Dow Jones.
Diversification Opportunities for ETF Series and Dow Jones
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ETF and Dow is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding ETF Series Solutions 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 ETF Series 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 ETF Series Solutions 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 ETF Series i.e., ETF Series and Dow Jones go up and down completely randomly.
Pair Corralation between ETF Series and Dow Jones
Given the investment horizon of 90 days ETF Series is expected to generate 1.37 times less return on investment than Dow Jones. But when comparing it to its historical volatility, ETF Series Solutions is 1.16 times less risky than Dow Jones. It trades about 0.14 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 3,857,103 in Dow Jones Industrial on September 1, 2024 and sell it today you would earn a total of 633,962 from holding Dow Jones Industrial or generate 16.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
ETF Series Solutions vs. Dow Jones Industrial
Performance |
| Timeline |
ETF Series and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
ETF Series Solutions
Pair trading matchups for ETF Series
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with ETF Series and Dow Jones
The main advantage of trading using opposite ETF Series and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETF Series 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.| ETF Series vs. iShares Core SP | ETF Series vs. iShares Core MSCI | ETF Series vs. iShares Broad USD | ETF Series vs. iShares Core SP |
| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
Other Complementary Tools
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Fundamental Analysis View fundamental data based on most recent published financial statements |