Correlation Between Dow Jones and WisdomTree Continuous
Can any of the company-specific risk be diversified away by investing in both Dow Jones and WisdomTree Continuous 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 WisdomTree Continuous 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 WisdomTree Continuous Commodity, you can compare the effects of market volatilities on Dow Jones and WisdomTree Continuous 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 WisdomTree Continuous. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and WisdomTree Continuous.
Diversification Opportunities for Dow Jones and WisdomTree Continuous
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and WisdomTree is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and WisdomTree Continuous Commodit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Continuous 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 WisdomTree Continuous. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Continuous has no effect on the direction of Dow Jones i.e., Dow Jones and WisdomTree Continuous go up and down completely randomly.
Pair Corralation between Dow Jones and WisdomTree Continuous
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.91 times more return on investment than WisdomTree Continuous. However, Dow Jones Industrial is 1.1 times less risky than WisdomTree Continuous. It trades about 0.1 of its potential returns per unit of risk. WisdomTree Continuous Commodity is currently generating about 0.09 per unit of risk. If you would invest 3,768,954 in Dow Jones Industrial on August 25, 2024 and sell it today you would earn a total of 660,697 from holding Dow Jones Industrial or generate 17.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. WisdomTree Continuous Commodit
Performance |
| Timeline |
Dow Jones and WisdomTree Continuous Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
WisdomTree Continuous Commodity
Pair trading matchups for WisdomTree Continuous
Pair Trading with Dow Jones and WisdomTree Continuous
The main advantage of trading using opposite Dow Jones and WisdomTree Continuous positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, WisdomTree Continuous 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 WisdomTree Continuous will offset losses from the drop in WisdomTree Continuous' 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 |
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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