Correlation Between IShares MSCI and Dow Jones
Can any of the company-specific risk be diversified away by investing in both IShares MSCI 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 MSCI 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 MSCI ACWI and Dow Jones Industrial, you can compare the effects of market volatilities on IShares MSCI 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 MSCI with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and Dow Jones.
Diversification Opportunities for IShares MSCI and Dow Jones
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and Dow is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI ACWI 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 MSCI 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 MSCI ACWI 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 MSCI i.e., IShares MSCI and Dow Jones go up and down completely randomly.
Pair Corralation between IShares MSCI and Dow Jones
Given the investment horizon of 90 days IShares MSCI is expected to generate 3.15 times less return on investment than Dow Jones. But when comparing it to its historical volatility, iShares MSCI ACWI is 1.45 times less risky than Dow Jones. It trades about 0.12 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 4,223,305 in Dow Jones Industrial on August 30, 2024 and sell it today you would earn a total of 248,901 from holding Dow Jones Industrial or generate 5.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares MSCI ACWI vs. Dow Jones Industrial
Performance |
| Timeline |
IShares MSCI and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
iShares MSCI ACWI
Pair trading matchups for IShares MSCI
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with IShares MSCI and Dow Jones
The main advantage of trading using opposite IShares MSCI and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI 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 MSCI vs. Mackenzie Canadian Equity | IShares MSCI vs. Mackenzie Large Cap | IShares MSCI vs. BMO MSCI EAFE | IShares MSCI vs. BMO Long Federal |
| Dow Jones vs. Skillful Craftsman Education | Dow Jones vs. Acco Brands | Dow Jones vs. Cracker Barrel Old | Dow Jones vs. Coursera |
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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
Other Complementary Tools
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Bonds Directory Find actively traded corporate debentures issued by US companies |