Correlation Between Dow Jones and BetaShares Global
Can any of the company-specific risk be diversified away by investing in both Dow Jones and BetaShares Global 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 Global 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 Global Banks, you can compare the effects of market volatilities on Dow Jones and BetaShares Global 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 Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and BetaShares Global.
Diversification Opportunities for Dow Jones and BetaShares Global
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dow and BetaShares is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and BetaShares Global Banks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BetaShares Global Banks 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 Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BetaShares Global Banks has no effect on the direction of Dow Jones i.e., Dow Jones and BetaShares Global go up and down completely randomly.
Pair Corralation between Dow Jones and BetaShares Global
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.05 times less return on investment than BetaShares Global. But when comparing it to its historical volatility, Dow Jones Industrial is 1.01 times less risky than BetaShares Global. It trades about 0.26 of its potential returns per unit of risk. BetaShares Global Banks is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 811.00 in BetaShares Global Banks on August 29, 2024 and sell it today you would earn a total of 50.00 from holding BetaShares Global Banks or generate 6.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. BetaShares Global Banks
Performance |
| Timeline |
Dow Jones and BetaShares Global Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
BetaShares Global Banks
Pair trading matchups for BetaShares Global
Pair Trading with Dow Jones and BetaShares Global
The main advantage of trading using opposite Dow Jones and BetaShares Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, BetaShares Global 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 Global will offset losses from the drop in BetaShares Global's long position.| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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