Correlation Between Dow Jones and IShares Automation
Can any of the company-specific risk be diversified away by investing in both Dow Jones and IShares Automation 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 Automation 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 Automation Robotics, you can compare the effects of market volatilities on Dow Jones and IShares Automation 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 Automation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and IShares Automation.
Diversification Opportunities for Dow Jones and IShares Automation
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dow and IShares is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and iShares Automation Robotics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Automation 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 Automation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Automation has no effect on the direction of Dow Jones i.e., Dow Jones and IShares Automation go up and down completely randomly.
Pair Corralation between Dow Jones and IShares Automation
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.4 times less return on investment than IShares Automation. But when comparing it to its historical volatility, Dow Jones Industrial is 1.72 times less risky than IShares Automation. It trades about 0.08 of its potential returns per unit of risk. iShares Automation Robotics is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 984.00 in iShares Automation Robotics on September 2, 2024 and sell it today you would earn a total of 442.00 from holding iShares Automation Robotics or generate 44.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.4% |
| Values | Daily Returns |
Dow Jones Industrial vs. iShares Automation Robotics
Performance |
| Timeline |
Dow Jones and IShares Automation Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
iShares Automation Robotics
Pair trading matchups for IShares Automation
Pair Trading with Dow Jones and IShares Automation
The main advantage of trading using opposite Dow Jones and IShares Automation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, IShares Automation 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 Automation will offset losses from the drop in IShares Automation's long position.| Dow Jones vs. Dream Finders Homes | Dow Jones vs. GEN Restaurant Group, | Dow Jones vs. National Beverage Corp | Dow Jones vs. BJs Restaurants |
| IShares Automation vs. Vanguard FTSE Developed | IShares Automation vs. Leverage Shares 2x | IShares Automation vs. Amundi Index Solutions | IShares Automation vs. Amundi Index Solutions |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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