Correlation Between Dow Jones and UBS ETF
Can any of the company-specific risk be diversified away by investing in both Dow Jones and UBS ETF 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 UBS ETF 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 UBS ETF Gold, you can compare the effects of market volatilities on Dow Jones and UBS ETF 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 UBS ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and UBS ETF.
Diversification Opportunities for Dow Jones and UBS ETF
Weak diversification
The 3 months correlation between Dow and UBS is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and UBS ETF Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBS ETF Gold 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 UBS ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UBS ETF Gold has no effect on the direction of Dow Jones i.e., Dow Jones and UBS ETF go up and down completely randomly.
Pair Corralation between Dow Jones and UBS ETF
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.22 times less return on investment than UBS ETF. But when comparing it to its historical volatility, Dow Jones Industrial is 1.2 times less risky than UBS ETF. It trades about 0.08 of its potential returns per unit of risk. UBS ETF Gold is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 5,058 in UBS ETF Gold on September 4, 2024 and sell it today you would earn a total of 2,015 from holding UBS ETF Gold or generate 39.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Dow Jones Industrial vs. UBS ETF Gold
Performance |
| Timeline |
Dow Jones and UBS ETF Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
UBS ETF Gold
Pair trading matchups for UBS ETF
Pair Trading with Dow Jones and UBS ETF
The main advantage of trading using opposite Dow Jones and UBS ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, UBS ETF 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 UBS ETF will offset losses from the drop in UBS ETF's long position.| Dow Jones vs. Gentex | Dow Jones vs. American Axle Manufacturing | Dow Jones vs. Pearson PLC ADR | Dow Jones vs. Marine Products |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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