Correlation Between Dow Jones and IShares V
Can any of the company-specific risk be diversified away by investing in both Dow Jones and IShares V 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 V 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 V PLC, you can compare the effects of market volatilities on Dow Jones and IShares V 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 V. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and IShares V.
Diversification Opportunities for Dow Jones and IShares V
Poor diversification
The 3 months correlation between Dow and IShares is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and iShares V PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares V PLC 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 V. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares V PLC has no effect on the direction of Dow Jones i.e., Dow Jones and IShares V go up and down completely randomly.
Pair Corralation between Dow Jones and IShares V
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 4.4 times more return on investment than IShares V. However, Dow Jones is 4.4 times more volatile than iShares V PLC. It trades about 0.07 of its potential returns per unit of risk. iShares V PLC is currently generating about 0.16 per unit of risk. If you would invest 3,322,080 in Dow Jones Industrial on September 19, 2024 and sell it today you would earn a total of 910,607 from holding Dow Jones Industrial or generate 27.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 55.65% |
| Values | Daily Returns |
Dow Jones Industrial vs. iShares V PLC
Performance |
| Timeline |
Dow Jones and IShares V Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
iShares V PLC
Pair trading matchups for IShares V
Pair Trading with Dow Jones and IShares V
The main advantage of trading using opposite Dow Jones and IShares V positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, IShares V 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 V will offset losses from the drop in IShares V's long position.| Dow Jones vs. Digi International | Dow Jones vs. Grupo Televisa SAB | Dow Jones vs. United Microelectronics | Dow Jones vs. Weibo Corp |
| IShares V vs. Lyxor UCITS Japan | IShares V vs. Lyxor UCITS Japan | IShares V vs. Lyxor UCITS Stoxx | IShares V vs. Amundi CAC 40 |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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