Correlation Between Dow Jones and IShares Asia
Can any of the company-specific risk be diversified away by investing in both Dow Jones and IShares Asia 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 IShares Asia 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 iShares Asia Pacific, you can compare the effects of market volatilities on Dow Jones and IShares Asia 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 IShares Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and IShares Asia.
Diversification Opportunities for Dow Jones and IShares Asia
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and IShares is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and iShares Asia Pacific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Asia Pacific 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 IShares Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Asia Pacific has no effect on the direction of Dow Jones i.e., Dow Jones and IShares Asia go up and down completely randomly.
Pair Corralation between Dow Jones and IShares Asia
Assuming the 90 days trading horizon Dow Jones Industrial is expected to under-perform the IShares Asia. But the index apears to be less risky and, when comparing its historical volatility, Dow Jones Industrial is 1.12 times less risky than IShares Asia. The index trades about -0.25 of its potential returns per unit of risk. The iShares Asia Pacific is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,276 in iShares Asia Pacific on November 29, 2024 and sell it today you would earn a total of 16.00 from holding iShares Asia Pacific or generate 0.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Dow Jones Industrial vs. iShares Asia Pacific
Performance |
| Timeline |
Dow Jones and IShares Asia Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
iShares Asia Pacific
Pair trading matchups for IShares Asia
Pair Trading with Dow Jones and IShares Asia
The main advantage of trading using opposite Dow Jones and IShares Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, IShares Asia 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 IShares Asia will offset losses from the drop in IShares Asia's long position.| Dow Jones vs. Starbucks | Dow Jones vs. Westinghouse Air Brake | Dow Jones vs. Finnair Oyj | Dow Jones vs. Mesa Air Group |
| IShares Asia vs. iShares Corp Bond | IShares Asia vs. iShares Emerging Asia | IShares Asia vs. iShares MSCI Global | IShares Asia vs. iShares VII PLC |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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