Correlation Between Dow Jones and IShares Euro
Can any of the company-specific risk be diversified away by investing in both Dow Jones and IShares Euro 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 Euro 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 Euro Dividend, you can compare the effects of market volatilities on Dow Jones and IShares Euro 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 Euro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and IShares Euro.
Diversification Opportunities for Dow Jones and IShares Euro
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dow and IShares is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and iShares Euro Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Euro Dividend 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 Euro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Euro Dividend has no effect on the direction of Dow Jones i.e., Dow Jones and IShares Euro go up and down completely randomly.
Pair Corralation between Dow Jones and IShares Euro
Assuming the 90 days trading horizon Dow Jones Industrial is expected to under-perform the IShares Euro. But the index apears to be less risky and, when comparing its historical volatility, Dow Jones Industrial is 1.21 times less risky than IShares Euro. The index trades about -0.01 of its potential returns per unit of risk. The iShares Euro Dividend is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,761 in iShares Euro Dividend on September 12, 2024 and sell it today you would earn a total of 21.00 from holding iShares Euro Dividend or generate 1.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 91.3% |
| Values | Daily Returns |
Dow Jones Industrial vs. iShares Euro Dividend
Performance |
| Timeline |
Dow Jones and IShares Euro Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
iShares Euro Dividend
Pair trading matchups for IShares Euro
Pair Trading with Dow Jones and IShares Euro
The main advantage of trading using opposite Dow Jones and IShares Euro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, IShares Euro 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 Euro will offset losses from the drop in IShares Euro's long position.| Dow Jones vs. Aeye Inc | Dow Jones vs. Gentex | Dow Jones vs. Marine Products | Dow Jones vs. CarsalesCom Ltd ADR |
| IShares Euro vs. SPDR Dow Jones | IShares Euro vs. iShares Core MSCI | IShares Euro vs. iShares SP 500 | IShares Euro vs. Vanguard FTSE All World |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
Other Complementary Tools
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals |