Correlation Between Dow Jones and Global X
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Global X 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 Global X 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 Global X Preferred, you can compare the effects of market volatilities on Dow Jones and Global X 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 Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Global X.
Diversification Opportunities for Dow Jones and Global X
Weak diversification
The 3 months correlation between Dow and Global is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Global X Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Preferred 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 Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X Preferred has no effect on the direction of Dow Jones i.e., Dow Jones and Global X go up and down completely randomly.
Pair Corralation between Dow Jones and Global X
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.34 times more return on investment than Global X. However, Dow Jones is 1.34 times more volatile than Global X Preferred. It trades about 0.1 of its potential returns per unit of risk. Global X Preferred is currently generating about 0.05 per unit of risk. If you would invest 3,851,984 in Dow Jones Industrial on August 29, 2024 and sell it today you would earn a total of 634,047 from holding Dow Jones Industrial or generate 16.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Global X Preferred
Performance |
| Timeline |
Dow Jones and Global X Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Global X Preferred
Pair trading matchups for Global X
Pair Trading with Dow Jones and Global X
The main advantage of trading using opposite Dow Jones and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Global X 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 Global X will offset losses from the drop in Global X's long position.| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
| Global X vs. VanEck Preferred Securities | Global X vs. Global X SuperIncome | Global X vs. Virtus InfraCap Preferred | Global X vs. SPDR ICE Preferred |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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