Correlation Between Dow Jones and IShares CMBS
Can any of the company-specific risk be diversified away by investing in both Dow Jones and IShares CMBS 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 IShares CMBS 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 iShares CMBS ETF, you can compare the effects of market volatilities on Dow Jones and IShares CMBS 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 IShares CMBS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and IShares CMBS.
Diversification Opportunities for Dow Jones and IShares CMBS
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dow and IShares is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and iShares CMBS ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares CMBS ETF 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 IShares CMBS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares CMBS ETF has no effect on the direction of Dow Jones i.e., Dow Jones and IShares CMBS go up and down completely randomly.
Pair Corralation between Dow Jones and IShares CMBS
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 3.77 times more return on investment than IShares CMBS. However, Dow Jones is 3.77 times more volatile than iShares CMBS ETF. It trades about 0.29 of its potential returns per unit of risk. iShares CMBS ETF is currently generating about 0.01 per unit of risk. If you would invest 4,214,154 in Dow Jones Industrial on August 31, 2024 and sell it today you would earn a total of 258,052 from holding Dow Jones Industrial or generate 6.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. iShares CMBS ETF
Performance |
| Timeline |
Dow Jones and IShares CMBS Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
iShares CMBS ETF
Pair trading matchups for IShares CMBS
Pair Trading with Dow Jones and IShares CMBS
The main advantage of trading using opposite Dow Jones and IShares CMBS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, IShares CMBS 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 IShares CMBS will offset losses from the drop in IShares CMBS's long position.| Dow Jones vs. Aerofoam Metals | Dow Jones vs. ACG Metals Limited | Dow Jones vs. China Clean Energy | Dow Jones vs. Fast Retailing Co |
| IShares CMBS vs. iShares Agency Bond | IShares CMBS vs. iShares GNMA Bond | IShares CMBS vs. iShares JP Morgan | IShares CMBS vs. iShares Aaa |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
Other Complementary Tools
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals |