Correlation Between Dow Jones and Unconstrained Emerging
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Unconstrained Emerging 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 Unconstrained Emerging 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 Unconstrained Emerging Markets, you can compare the effects of market volatilities on Dow Jones and Unconstrained Emerging 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 Unconstrained Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Unconstrained Emerging.
Diversification Opportunities for Dow Jones and Unconstrained Emerging
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Dow and Unconstrained is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Unconstrained Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unconstrained Emerging 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 Unconstrained Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unconstrained Emerging has no effect on the direction of Dow Jones i.e., Dow Jones and Unconstrained Emerging go up and down completely randomly.
Pair Corralation between Dow Jones and Unconstrained Emerging
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 2.24 times more return on investment than Unconstrained Emerging. However, Dow Jones is 2.24 times more volatile than Unconstrained Emerging Markets. It trades about 0.21 of its potential returns per unit of risk. Unconstrained Emerging Markets is currently generating about -0.11 per unit of risk. If you would invest 4,237,436 in Dow Jones Industrial on August 25, 2024 and sell it today you would earn a total of 192,215 from holding Dow Jones Industrial or generate 4.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Unconstrained Emerging Markets
Performance |
| Timeline |
Dow Jones and Unconstrained Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Unconstrained Emerging Markets
Pair trading matchups for Unconstrained Emerging
Pair Trading with Dow Jones and Unconstrained Emerging
The main advantage of trading using opposite Dow Jones and Unconstrained Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Unconstrained Emerging 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 Unconstrained Emerging will offset losses from the drop in Unconstrained Emerging's long position.| Dow Jones vs. Vistra Energy Corp | Dow Jones vs. Fluence Energy | Dow Jones vs. Old Republic International | Dow Jones vs. Empresa Distribuidora y |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
Other Complementary Tools
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges |