Correlation Between Dow Jones and ISHARES IV
Can any of the company-specific risk be diversified away by investing in both Dow Jones and ISHARES IV 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 IV 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 IV PLC, you can compare the effects of market volatilities on Dow Jones and ISHARES IV 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 IV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and ISHARES IV.
Diversification Opportunities for Dow Jones and ISHARES IV
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dow and ISHARES is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and ISHARES IV PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ISHARES IV 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 IV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ISHARES IV PLC has no effect on the direction of Dow Jones i.e., Dow Jones and ISHARES IV go up and down completely randomly.
Pair Corralation between Dow Jones and ISHARES IV
Assuming the 90 days trading horizon Dow Jones is expected to generate 2.31 times less return on investment than ISHARES IV. But when comparing it to its historical volatility, Dow Jones Industrial is 1.46 times less risky than ISHARES IV. It trades about 0.08 of its potential returns per unit of risk. ISHARES IV PLC is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 549.00 in ISHARES IV PLC on September 4, 2024 and sell it today you would earn a total of 187.00 from holding ISHARES IV PLC or generate 34.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 46.06% |
| Values | Daily Returns |
Dow Jones Industrial vs. ISHARES IV PLC
Performance |
| Timeline |
Dow Jones and ISHARES IV Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
ISHARES IV PLC
Pair trading matchups for ISHARES IV
Pair Trading with Dow Jones and ISHARES IV
The main advantage of trading using opposite Dow Jones and ISHARES IV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, ISHARES IV 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 IV will offset losses from the drop in ISHARES IV's long position.| Dow Jones vs. Gentex | Dow Jones vs. American Axle Manufacturing | Dow Jones vs. Pearson PLC ADR | Dow Jones vs. Marine Products |
| ISHARES IV vs. Scottish Mortgage Investment | ISHARES IV vs. VinaCapital Vietnam Opportunity | ISHARES IV vs. Edinburgh Worldwide Investment | ISHARES IV vs. Baillie Gifford Growth |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
Other Complementary Tools
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories |