Correlation Between SPDR Dow and IShares Dow
Can any of the company-specific risk be diversified away by investing in both SPDR Dow and IShares Dow 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 Dow and IShares Dow into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR Dow Jones and iShares Dow Jones, you can compare the effects of market volatilities on SPDR Dow and IShares Dow 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 Dow with a short position of IShares Dow. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Dow and IShares Dow.
Diversification Opportunities for SPDR Dow and IShares Dow
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between SPDR and IShares is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Dow Jones and iShares Dow Jones in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Dow Jones and SPDR Dow 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 Dow Jones are associated (or correlated) with IShares Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Dow Jones has no effect on the direction of SPDR Dow i.e., SPDR Dow and IShares Dow go up and down completely randomly.
Pair Corralation between SPDR Dow and IShares Dow
Assuming the 90 days trading horizon SPDR Dow is expected to generate 1.18 times less return on investment than IShares Dow. In addition to that, SPDR Dow is 1.07 times more volatile than iShares Dow Jones. It trades about 0.08 of its total potential returns per unit of risk. iShares Dow Jones is currently generating about 0.1 per unit of volatility. If you would invest 5,069 in iShares Dow Jones on August 29, 2024 and sell it today you would earn a total of 2,044 from holding iShares Dow Jones or generate 40.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR Dow Jones vs. iShares Dow Jones
Performance |
| Timeline |
| SPDR Dow Jones |
| iShares Dow Jones |
SPDR Dow and IShares Dow Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR Dow and IShares Dow
The main advantage of trading using opposite SPDR Dow and IShares Dow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Dow position performs unexpectedly, IShares Dow 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 IShares Dow will offset losses from the drop in IShares Dow's long position.| SPDR Dow vs. SPDR MSCI World | SPDR Dow vs. SPDR SP Dividend | SPDR Dow vs. SPDR SP 500 | SPDR Dow vs. SPDR BB SB |
| IShares Dow vs. iShares III Public | IShares Dow vs. iShares Core MSCI | IShares Dow vs. iShares France Govt | IShares Dow vs. iShares Edge MSCI |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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