Correlation Between Dow Jones and ProShares MSCI
Can any of the company-specific risk be diversified away by investing in both Dow Jones and ProShares MSCI 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 ProShares MSCI 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 ProShares MSCI Emerging, you can compare the effects of market volatilities on Dow Jones and ProShares MSCI 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 ProShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and ProShares MSCI.
Diversification Opportunities for Dow Jones and ProShares MSCI
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Dow and ProShares is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and ProShares MSCI Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares MSCI 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 ProShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares MSCI Emerging has no effect on the direction of Dow Jones i.e., Dow Jones and ProShares MSCI go up and down completely randomly.
Pair Corralation between Dow Jones and ProShares MSCI
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.92 times more return on investment than ProShares MSCI. However, Dow Jones Industrial is 1.09 times less risky than ProShares MSCI. It trades about -0.03 of its potential returns per unit of risk. ProShares MSCI Emerging is currently generating about -0.06 per unit of risk. If you would invest 4,501,404 in Dow Jones Industrial on November 4, 2024 and sell it today you would lose (46,938) from holding Dow Jones Industrial or give up 1.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 97.56% |
| Values | Daily Returns |
Dow Jones Industrial vs. ProShares MSCI Emerging
Performance |
| Timeline |
Dow Jones and ProShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
ProShares MSCI Emerging
Pair trading matchups for ProShares MSCI
Pair Trading with Dow Jones and ProShares MSCI
The main advantage of trading using opposite Dow Jones and ProShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, ProShares MSCI 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 ProShares MSCI will offset losses from the drop in ProShares MSCI's long position.| Dow Jones vs. Rambler Metals and | Dow Jones vs. Nicola Mining | Dow Jones vs. Old Dominion Freight | Dow Jones vs. United Guardian |
| ProShares MSCI vs. ProShares MSCI EAFE | ProShares MSCI vs. ProShares MSCI Europe | ProShares MSCI vs. ProShares Russell 2000 | ProShares MSCI vs. ProShares SP MidCap |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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