Correlation Between Dow Jones and SHP ETF
Can any of the company-specific risk be diversified away by investing in both Dow Jones and SHP 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 SHP 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 SHP ETF Trust, you can compare the effects of market volatilities on Dow Jones and SHP 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 SHP ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and SHP ETF.
Diversification Opportunities for Dow Jones and SHP ETF
Excellent diversification
The 3 months correlation between Dow and SHP is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and SHP ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SHP ETF Trust 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 SHP ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SHP ETF Trust has no effect on the direction of Dow Jones i.e., Dow Jones and SHP ETF go up and down completely randomly.
Pair Corralation between Dow Jones and SHP ETF
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 2.36 times more return on investment than SHP ETF. However, Dow Jones is 2.36 times more volatile than SHP ETF Trust. It trades about 0.15 of its potential returns per unit of risk. SHP ETF Trust is currently generating about 0.11 per unit of risk. If you would invest 3,868,632 in Dow Jones Industrial on August 29, 2024 and sell it today you would earn a total of 603,574 from holding Dow Jones Industrial or generate 15.6% 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. SHP ETF Trust
Performance |
| Timeline |
Dow Jones and SHP ETF Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
SHP ETF Trust
Pair trading matchups for SHP ETF
Pair Trading with Dow Jones and SHP ETF
The main advantage of trading using opposite Dow Jones and SHP ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, SHP 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 SHP ETF will offset losses from the drop in SHP ETF's long position.| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
| SHP ETF vs. Valued Advisers Trust | SHP ETF vs. Columbia Diversified Fixed | SHP ETF vs. Principal Exchange Traded Funds | SHP ETF vs. Doubleline Etf Trust |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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