Correlation Between Dow Jones and ISS AS
Can any of the company-specific risk be diversified away by investing in both Dow Jones and ISS AS 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 ISS AS 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 ISS AS, you can compare the effects of market volatilities on Dow Jones and ISS AS 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 ISS AS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and ISS AS.
Diversification Opportunities for Dow Jones and ISS AS
Modest diversification
The 3 months correlation between Dow and ISS is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and ISS AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ISS AS 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 ISS AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ISS AS has no effect on the direction of Dow Jones i.e., Dow Jones and ISS AS go up and down completely randomly.
Pair Corralation between Dow Jones and ISS AS
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.73 times more return on investment than ISS AS. However, Dow Jones Industrial is 1.37 times less risky than ISS AS. It trades about 0.37 of its potential returns per unit of risk. ISS AS is currently generating about -0.09 per unit of risk. If you would invest 4,176,346 in Dow Jones Industrial on September 1, 2024 and sell it today you would earn a total of 314,719 from holding Dow Jones Industrial or generate 7.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Dow Jones Industrial vs. ISS AS
Performance |
| Timeline |
Dow Jones and ISS AS Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
ISS AS
Pair trading matchups for ISS AS
Pair Trading with Dow Jones and ISS AS
The main advantage of trading using opposite Dow Jones and ISS AS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, ISS AS 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 ISS AS will offset losses from the drop in ISS AS's long position.| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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