Correlation Between Dow Jones and Global X
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Global X 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 Global X 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 Global X Guru, you can compare the effects of market volatilities on Dow Jones and Global X 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 Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Global X.
Diversification Opportunities for Dow Jones and Global X
Almost no diversification
The 3 months correlation between Dow and Global is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Global X Guru in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Guru 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 Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X Guru has no effect on the direction of Dow Jones i.e., Dow Jones and Global X go up and down completely randomly.
Pair Corralation between Dow Jones and Global X
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.48 times less return on investment than Global X. But when comparing it to its historical volatility, Dow Jones Industrial is 1.22 times less risky than Global X. It trades about 0.16 of its potential returns per unit of risk. Global X Guru is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 4,239 in Global X Guru on September 1, 2024 and sell it today you would earn a total of 1,080 from holding Global X Guru or generate 25.48% 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. Global X Guru
Performance |
| Timeline |
Dow Jones and Global X Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Global X Guru
Pair trading matchups for Global X
Pair Trading with Dow Jones and Global X
The main advantage of trading using opposite Dow Jones and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Global X 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 Global X will offset losses from the drop in Global X's long position.| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
| Global X vs. Global X Millennials | Global X vs. Global X Social | Global X vs. iShares Core Moderate | Global X vs. SPDR SP Global |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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