Correlation Between ISHARES III and Dow Jones
Can any of the company-specific risk be diversified away by investing in both ISHARES III 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 ISHARES III and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ISHARES III PLC and Dow Jones Industrial, you can compare the effects of market volatilities on ISHARES III 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 ISHARES III with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of ISHARES III and Dow Jones.
Diversification Opportunities for ISHARES III and Dow Jones
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ISHARES and Dow is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding ISHARES III PLC 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 ISHARES III 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 ISHARES III PLC 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 ISHARES III i.e., ISHARES III and Dow Jones go up and down completely randomly.
Pair Corralation between ISHARES III and Dow Jones
Assuming the 90 days trading horizon ISHARES III PLC is expected to generate 226.63 times more return on investment than Dow Jones. However, ISHARES III is 226.63 times more volatile than Dow Jones Industrial. It trades about 0.22 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.37 per unit of risk. If you would invest 829.00 in ISHARES III PLC on September 5, 2024 and sell it today you would earn a total of 116,981 from holding ISHARES III PLC or generate 14111.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
ISHARES III PLC vs. Dow Jones Industrial
Performance |
| Timeline |
ISHARES III and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
ISHARES III PLC
Pair trading matchups for ISHARES III
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with ISHARES III and Dow Jones
The main advantage of trading using opposite ISHARES III and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ISHARES III 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.| ISHARES III vs. Scottish Mortgage Investment | ISHARES III vs. VinaCapital Vietnam Opportunity | ISHARES III vs. Edinburgh Worldwide Investment | ISHARES III vs. Baillie Gifford Growth |
| Dow Jones vs. Shake Shack | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. Dave Busters Entertainment | Dow Jones vs. Meli Hotels International |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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