Correlation Between Dow Jones and Emerging Markets
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Emerging Markets 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 Dow Jones and Emerging Markets into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Emerging Markets Debt, you can compare the effects of market volatilities on Dow Jones and Emerging Markets 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 Dow Jones with a short position of Emerging Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Emerging Markets.
Diversification Opportunities for Dow Jones and Emerging Markets
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dow and Emerging is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Emerging Markets Debt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets Debt and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with Emerging Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerging Markets Debt has no effect on the direction of Dow Jones i.e., Dow Jones and Emerging Markets go up and down completely randomly.
Pair Corralation between Dow Jones and Emerging Markets
Assuming the 90 days trading horizon Dow Jones is expected to generate 15.24 times less return on investment than Emerging Markets. In addition to that, Dow Jones is 2.72 times more volatile than Emerging Markets Debt. It trades about 0.0 of its total potential returns per unit of risk. Emerging Markets Debt is currently generating about 0.13 per unit of volatility. If you would invest 883.00 in Emerging Markets Debt on September 13, 2024 and sell it today you would earn a total of 5.00 from holding Emerging Markets Debt or generate 0.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Emerging Markets Debt
Performance |
| Timeline |
Dow Jones and Emerging Markets Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Emerging Markets Debt
Pair trading matchups for Emerging Markets
Pair Trading with Dow Jones and Emerging Markets
The main advantage of trading using opposite Dow Jones and Emerging Markets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Emerging Markets 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 Emerging Markets will offset losses from the drop in Emerging Markets' long position.| Dow Jones vs. Hurco Companies | Dow Jones vs. Tyson Foods | Dow Jones vs. MYR Group | Dow Jones vs. Cannae Holdings |
| Emerging Markets vs. Barings Active Short | Emerging Markets vs. Prudential Short Duration | Emerging Markets vs. Blackrock Short Term Inflat Protected | Emerging Markets vs. Angel Oak Ultrashort |
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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