Correlation Between Dow Jones and VanEck Green
Can any of the company-specific risk be diversified away by investing in both Dow Jones and VanEck Green 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 VanEck Green 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 VanEck Green Bond, you can compare the effects of market volatilities on Dow Jones and VanEck Green 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 VanEck Green. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and VanEck Green.
Diversification Opportunities for Dow Jones and VanEck Green
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dow and VanEck is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and VanEck Green Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Green Bond 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 VanEck Green. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Green Bond has no effect on the direction of Dow Jones i.e., Dow Jones and VanEck Green go up and down completely randomly.
Pair Corralation between Dow Jones and VanEck Green
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 2.3 times more return on investment than VanEck Green. However, Dow Jones is 2.3 times more volatile than VanEck Green Bond. It trades about 0.07 of its potential returns per unit of risk. VanEck Green Bond is currently generating about 0.06 per unit of risk. If you would invest 3,442,988 in Dow Jones Industrial on August 23, 2024 and sell it today you would earn a total of 944,047 from holding Dow Jones Industrial or generate 27.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. VanEck Green Bond
Performance |
| Timeline |
Dow Jones and VanEck Green Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
VanEck Green Bond
Pair trading matchups for VanEck Green
Pair Trading with Dow Jones and VanEck Green
The main advantage of trading using opposite Dow Jones and VanEck Green positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, VanEck Green 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 VanEck Green will offset losses from the drop in VanEck Green's long position.| Dow Jones vs. Barrick Gold Corp | Dow Jones vs. Jutal Offshore Oil | Dow Jones vs. Eastern Co | Dow Jones vs. Weyco Group |
| VanEck Green vs. iShares USD Green | VanEck Green vs. First Trust California | VanEck Green vs. Great Southern Bancorp | VanEck Green vs. VanEck China Bond |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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