Correlation Between Dow Jones and Trend ETF
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Trend ETF 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 Trend ETF 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 Trend ETF MSCI, you can compare the effects of market volatilities on Dow Jones and Trend ETF 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 Trend ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Trend ETF.
Diversification Opportunities for Dow Jones and Trend ETF
Average diversification
The 3 months correlation between Dow and Trend is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Trend ETF MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trend ETF MSCI 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 Trend ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trend ETF MSCI has no effect on the direction of Dow Jones i.e., Dow Jones and Trend ETF go up and down completely randomly.
Pair Corralation between Dow Jones and Trend ETF
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.74 times more return on investment than Trend ETF. However, Dow Jones Industrial is 1.36 times less risky than Trend ETF. It trades about 0.16 of its potential returns per unit of risk. Trend ETF MSCI is currently generating about 0.04 per unit of risk. If you would invest 4,109,677 in Dow Jones Industrial on September 12, 2024 and sell it today you would earn a total of 305,179 from holding Dow Jones Industrial or generate 7.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.44% |
| Values | Daily Returns |
Dow Jones Industrial vs. Trend ETF MSCI
Performance |
| Timeline |
Dow Jones and Trend ETF Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Trend ETF MSCI
Pair trading matchups for Trend ETF
Pair Trading with Dow Jones and Trend ETF
The main advantage of trading using opposite Dow Jones and Trend ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Trend ETF 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 Trend ETF will offset losses from the drop in Trend ETF's long position.| Dow Jones vs. ChampionX | Dow Jones vs. Highway Holdings Limited | Dow Jones vs. Westinghouse Air Brake | Dow Jones vs. Cementos Pacasmayo SAA |
| Trend ETF vs. Energisa SA | Trend ETF vs. BTG Pactual Logstica | Trend ETF vs. Plano Plano Desenvolvimento | Trend ETF vs. Companhia Habitasul de |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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