Correlation Between Dow Jones and Invesco EQQQ
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Invesco EQQQ 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 Invesco EQQQ 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 Invesco EQQQ NASDAQ 100, you can compare the effects of market volatilities on Dow Jones and Invesco EQQQ 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 Invesco EQQQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Invesco EQQQ.
Diversification Opportunities for Dow Jones and Invesco EQQQ
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dow and Invesco is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Invesco EQQQ NASDAQ 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco EQQQ NASDAQ 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 Invesco EQQQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco EQQQ NASDAQ has no effect on the direction of Dow Jones i.e., Dow Jones and Invesco EQQQ go up and down completely randomly.
Pair Corralation between Dow Jones and Invesco EQQQ
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.3 times less return on investment than Invesco EQQQ. But when comparing it to its historical volatility, Dow Jones Industrial is 1.52 times less risky than Invesco EQQQ. It trades about 0.13 of its potential returns per unit of risk. Invesco EQQQ NASDAQ 100 is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 26,975 in Invesco EQQQ NASDAQ 100 on September 2, 2024 and sell it today you would earn a total of 8,645 from holding Invesco EQQQ NASDAQ 100 or generate 32.05% 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. Invesco EQQQ NASDAQ 100
Performance |
| Timeline |
Dow Jones and Invesco EQQQ Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Invesco EQQQ NASDAQ 100
Pair trading matchups for Invesco EQQQ
Pair Trading with Dow Jones and Invesco EQQQ
The main advantage of trading using opposite Dow Jones and Invesco EQQQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Invesco EQQQ 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 Invesco EQQQ will offset losses from the drop in Invesco EQQQ's long position.| Dow Jones vs. Dream Finders Homes | Dow Jones vs. GEN Restaurant Group, | Dow Jones vs. National Beverage Corp | Dow Jones vs. BJs Restaurants |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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