Correlation Between Dow Jones and FlexShares ESG
Can any of the company-specific risk be diversified away by investing in both Dow Jones and FlexShares ESG 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 FlexShares ESG 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 FlexShares ESG Climate, you can compare the effects of market volatilities on Dow Jones and FlexShares ESG 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 FlexShares ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and FlexShares ESG.
Diversification Opportunities for Dow Jones and FlexShares ESG
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dow and FlexShares is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and FlexShares ESG Climate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares ESG Climate 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 FlexShares ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares ESG Climate has no effect on the direction of Dow Jones i.e., Dow Jones and FlexShares ESG go up and down completely randomly.
Pair Corralation between Dow Jones and FlexShares ESG
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.9 times more return on investment than FlexShares ESG. However, Dow Jones Industrial is 1.11 times less risky than FlexShares ESG. It trades about 0.16 of its potential returns per unit of risk. FlexShares ESG Climate is currently generating about 0.13 per unit of risk. If you would invest 3,857,103 in Dow Jones Industrial on September 1, 2024 and sell it today you would earn a total of 633,962 from holding Dow Jones Industrial or generate 16.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
Dow Jones Industrial vs. FlexShares ESG Climate
Performance |
| Timeline |
Dow Jones and FlexShares ESG Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
FlexShares ESG Climate
Pair trading matchups for FlexShares ESG
Pair Trading with Dow Jones and FlexShares ESG
The main advantage of trading using opposite Dow Jones and FlexShares ESG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, FlexShares ESG 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 FlexShares ESG will offset losses from the drop in FlexShares ESG's long position.| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
| FlexShares ESG vs. Vanguard Total Stock | FlexShares ESG vs. SPDR SP 500 | FlexShares ESG vs. iShares Core SP | FlexShares ESG vs. Vanguard Dividend Appreciation |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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