Correlation Between Dow Jones and Betashares Asia
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Betashares Asia 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 Betashares Asia 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 Betashares Asia Technology, you can compare the effects of market volatilities on Dow Jones and Betashares Asia 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 Betashares Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Betashares Asia.
Diversification Opportunities for Dow Jones and Betashares Asia
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and Betashares is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Betashares Asia Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Betashares Asia Tech 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 Betashares Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Betashares Asia Tech has no effect on the direction of Dow Jones i.e., Dow Jones and Betashares Asia go up and down completely randomly.
Pair Corralation between Dow Jones and Betashares Asia
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 2.0 times more return on investment than Betashares Asia. However, Dow Jones is 2.0 times more volatile than Betashares Asia Technology. It trades about 0.24 of its potential returns per unit of risk. Betashares Asia Technology is currently generating about -0.22 per unit of risk. If you would invest 4,211,440 in Dow Jones Industrial on August 26, 2024 and sell it today you would earn a total of 218,211 from holding Dow Jones Industrial or generate 5.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Betashares Asia Technology
Performance |
| Timeline |
Dow Jones and Betashares Asia Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Betashares Asia Technology
Pair trading matchups for Betashares Asia
Pair Trading with Dow Jones and Betashares Asia
The main advantage of trading using opposite Dow Jones and Betashares Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Betashares Asia 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 Betashares Asia will offset losses from the drop in Betashares Asia's long position.| Dow Jones vs. Vistra Energy Corp | Dow Jones vs. Fluence Energy | Dow Jones vs. Old Republic International | Dow Jones vs. Empresa Distribuidora y |
| Betashares Asia vs. BetaShares Global Government | Betashares Asia vs. BetaShares Geared Australian | Betashares Asia vs. Global X Semiconductor | Betashares Asia vs. iShares UBS Government |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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