Correlation Between Dow Jones and Invesco QQQ
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Invesco QQQ 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 Invesco QQQ 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 Invesco QQQ Trust, you can compare the effects of market volatilities on Dow Jones and Invesco QQQ 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 Invesco QQQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Invesco QQQ.
Diversification Opportunities for Dow Jones and Invesco QQQ
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dow and Invesco is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Invesco QQQ Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco QQQ Trust 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 Invesco QQQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco QQQ Trust has no effect on the direction of Dow Jones i.e., Dow Jones and Invesco QQQ go up and down completely randomly.
Pair Corralation between Dow Jones and Invesco QQQ
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.85 times more return on investment than Invesco QQQ. However, Dow Jones Industrial is 1.17 times less risky than Invesco QQQ. It trades about 0.26 of its potential returns per unit of risk. Invesco QQQ Trust is currently generating about 0.1 per unit of risk. If you would invest 4,238,757 in Dow Jones Industrial on August 28, 2024 and sell it today you would earn a total of 234,900 from holding Dow Jones Industrial or generate 5.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Invesco QQQ Trust
Performance |
| Timeline |
Dow Jones and Invesco QQQ Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Invesco QQQ Trust
Pair trading matchups for Invesco QQQ
Pair Trading with Dow Jones and Invesco QQQ
The main advantage of trading using opposite Dow Jones and Invesco QQQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Invesco QQQ 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 Invesco QQQ will offset losses from the drop in Invesco QQQ's long position.| Dow Jones vs. Meiwu Technology Co | Dow Jones vs. 17 Education Technology | Dow Jones vs. 51Talk Online Education | Dow Jones vs. Afya |
| Invesco QQQ vs. SPDR SP 500 | Invesco QQQ vs. Vanguard SP 500 | Invesco QQQ vs. iShares Russell 2000 | Invesco QQQ vs. SPDR Dow Jones |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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