Correlation Between Dow Jones and Emerging Markets
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Emerging Markets 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 Emerging Markets 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 Emerging Markets Sustainability, you can compare the effects of market volatilities on Dow Jones and Emerging Markets 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 Emerging Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Emerging Markets.
Diversification Opportunities for Dow Jones and Emerging Markets
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Dow and Emerging is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Emerging Markets Sustainabilit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets Sus 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 Emerging Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerging Markets Sus has no effect on the direction of Dow Jones i.e., Dow Jones and Emerging Markets go up and down completely randomly.
Pair Corralation between Dow Jones and Emerging Markets
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.9 times more return on investment than Emerging Markets. However, Dow Jones Industrial is 1.11 times less risky than Emerging Markets. It trades about -0.01 of its potential returns per unit of risk. Emerging Markets Sustainability is currently generating about -0.04 per unit of risk. If you would invest 4,429,313 in Dow Jones Industrial on September 12, 2024 and sell it today you would lose (4,530) from holding Dow Jones Industrial or give up 0.1% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Emerging Markets Sustainabilit
Performance |
| Timeline |
Dow Jones and Emerging Markets Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Emerging Markets Sustainability
Pair trading matchups for Emerging Markets
Pair Trading with Dow Jones and Emerging Markets
The main advantage of trading using opposite Dow Jones and Emerging Markets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Emerging Markets 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 Emerging Markets will offset losses from the drop in Emerging Markets' long position.| Dow Jones vs. Aeye Inc | Dow Jones vs. Gentex | Dow Jones vs. Marine Products | Dow Jones vs. CarsalesCom Ltd ADR |
| Emerging Markets vs. Dfa Intl Sustainability | Emerging Markets vs. Dfa Sustainability Core | Emerging Markets vs. Dfa Investment Dimensions | Emerging Markets vs. Dfa Sustainability Targeted |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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