Correlation Between Dow Jones and International Developed
Can any of the company-specific risk be diversified away by investing in both Dow Jones and International Developed 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 International Developed 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 International Developed Markets, you can compare the effects of market volatilities on Dow Jones and International Developed 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 International Developed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and International Developed.
Diversification Opportunities for Dow Jones and International Developed
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dow and International is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and International Developed Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Developed 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 International Developed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Developed has no effect on the direction of Dow Jones i.e., Dow Jones and International Developed go up and down completely randomly.
Pair Corralation between Dow Jones and International Developed
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.28 times more return on investment than International Developed. However, Dow Jones is 1.28 times more volatile than International Developed Markets. It trades about 0.37 of its potential returns per unit of risk. International Developed Markets is currently generating about 0.01 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 Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Dow Jones Industrial vs. International Developed Market
Performance |
| Timeline |
Dow Jones and International Developed Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
International Developed Markets
Pair trading matchups for International Developed
Pair Trading with Dow Jones and International Developed
The main advantage of trading using opposite Dow Jones and International Developed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, International Developed 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 International Developed will offset losses from the drop in International Developed'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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
Other Complementary Tools
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges |