Correlation Between SPDR Global and Dow Jones
Can any of the company-specific risk be diversified away by investing in both SPDR 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 SPDR 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 SPDR Global Dow and Dow Jones Industrial, you can compare the effects of market volatilities on SPDR 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 SPDR Global with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Global and Dow Jones.
Diversification Opportunities for SPDR Global and Dow Jones
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SPDR and Dow is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Global Dow 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 SPDR 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 SPDR Global Dow 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 SPDR Global i.e., SPDR Global and Dow Jones go up and down completely randomly.
Pair Corralation between SPDR Global and Dow Jones
Considering the 90-day investment horizon SPDR Global Dow is expected to generate 1.04 times more return on investment than Dow Jones. However, SPDR Global is 1.04 times more volatile than Dow Jones Industrial. It trades about 0.09 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.08 per unit of risk. If you would invest 9,786 in SPDR Global Dow on August 26, 2024 and sell it today you would earn a total of 3,907 from holding SPDR Global Dow or generate 39.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR Global Dow vs. Dow Jones Industrial
Performance |
| Timeline |
SPDR Global and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
SPDR Global Dow
Pair trading matchups for SPDR Global
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with SPDR Global and Dow Jones
The main advantage of trading using opposite SPDR Global and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR 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.| SPDR Global vs. Simplify Interest Rate | SPDR Global vs. WisdomTree Global High | SPDR Global vs. JP Morgan Exchange Traded |
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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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