Correlation Between Dow Jones and IShares Utilities
Can any of the company-specific risk be diversified away by investing in both Dow Jones and IShares Utilities 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 Utilities 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 Utilities ETF, you can compare the effects of market volatilities on Dow Jones and IShares Utilities 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 Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and IShares Utilities.
Diversification Opportunities for Dow Jones and IShares Utilities
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and IShares is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and iShares Utilities ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Utilities ETF 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 Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Utilities ETF has no effect on the direction of Dow Jones i.e., Dow Jones and IShares Utilities go up and down completely randomly.
Pair Corralation between Dow Jones and IShares Utilities
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.59 times more return on investment than IShares Utilities. However, Dow Jones Industrial is 1.68 times less risky than IShares Utilities. It trades about 0.34 of its potential returns per unit of risk. iShares Utilities ETF is currently generating about 0.12 per unit of risk. If you would invest 4,239,227 in Dow Jones Industrial on November 3, 2024 and sell it today you would earn a total of 215,239 from holding Dow Jones Industrial or generate 5.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. iShares Utilities ETF
Performance |
| Timeline |
Dow Jones and IShares Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
iShares Utilities ETF
Pair trading matchups for IShares Utilities
Pair Trading with Dow Jones and IShares Utilities
The main advantage of trading using opposite Dow Jones and IShares Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, IShares Utilities 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 Utilities will offset losses from the drop in IShares Utilities' long position.| Dow Jones vs. Cincinnati Financial | Dow Jones vs. Kellanova | Dow Jones vs. Acme United | Dow Jones vs. Procter Gamble |
| IShares Utilities vs. iShares Industrials ETF | IShares Utilities vs. iShares Consumer Discretionary | IShares Utilities vs. iShares Consumer Staples | IShares Utilities vs. iShares Telecommunications ETF |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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