Correlation Between Dow Jones and Xtrackers International
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Xtrackers International 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 Xtrackers International 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 Xtrackers International Real, you can compare the effects of market volatilities on Dow Jones and Xtrackers International 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 Xtrackers International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Xtrackers International.
Diversification Opportunities for Dow Jones and Xtrackers International
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and Xtrackers is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Xtrackers International Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers International 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 Xtrackers International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers International has no effect on the direction of Dow Jones i.e., Dow Jones and Xtrackers International go up and down completely randomly.
Pair Corralation between Dow Jones and Xtrackers International
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.73 times more return on investment than Xtrackers International. However, Dow Jones Industrial is 1.37 times less risky than Xtrackers International. It trades about 0.09 of its potential returns per unit of risk. Xtrackers International Real is currently generating about 0.01 per unit of risk. If you would invest 3,265,670 in Dow Jones Industrial on November 19, 2024 and sell it today you would earn a total of 1,188,938 from holding Dow Jones Industrial or generate 36.41% 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. Xtrackers International Real
Performance |
| Timeline |
Dow Jones and Xtrackers International Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Xtrackers International Real
Pair trading matchups for Xtrackers International
Pair Trading with Dow Jones and Xtrackers International
The main advantage of trading using opposite Dow Jones and Xtrackers International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Xtrackers International 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 Xtrackers International will offset losses from the drop in Xtrackers International's long position.| Dow Jones vs. National CineMedia | Dow Jones vs. Emerson Radio | Dow Jones vs. Space Communication | Dow Jones vs. JD Sports Fashion |
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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