Correlation Between IShares Global and Dow Jones
Can any of the company-specific risk be diversified away by investing in both IShares Global 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 Global 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 Global Agriculture and Dow Jones Industrial, you can compare the effects of market volatilities on IShares Global 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 Global with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Global and Dow Jones.
Diversification Opportunities for IShares Global and Dow Jones
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and Dow is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global Agriculture 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 Global 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 Global Agriculture 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 Global i.e., IShares Global and Dow Jones go up and down completely randomly.
Pair Corralation between IShares Global and Dow Jones
Assuming the 90 days trading horizon IShares Global is expected to generate 1.16 times less return on investment than Dow Jones. But when comparing it to its historical volatility, iShares Global Agriculture is 1.09 times less risky than Dow Jones. It trades about 0.35 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 4,176,346 in Dow Jones Industrial on September 1, 2024 and sell it today you would earn a total of 314,719 from holding Dow Jones Industrial or generate 7.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 91.3% |
| Values | Daily Returns |
iShares Global Agriculture vs. Dow Jones Industrial
Performance |
| Timeline |
IShares Global and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
iShares Global Agriculture
Pair trading matchups for IShares Global
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with IShares Global and Dow Jones
The main advantage of trading using opposite IShares Global and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Global 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 Global vs. iShares Canadian HYBrid | IShares Global vs. Brompton European Dividend | IShares Global vs. Solar Alliance Energy | IShares Global vs. PHN Multi Style All Cap |
| 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
Other Complementary Tools
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators |