Correlation Between Dow Jones and Select International
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Select International 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 Select International 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 Select International Equity, you can compare the effects of market volatilities on Dow Jones and Select International 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 Select International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Select International.
Diversification Opportunities for Dow Jones and Select International
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dow and Select is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Select International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select International 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 Select International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select International has no effect on the direction of Dow Jones i.e., Dow Jones and Select International go up and down completely randomly.
Pair Corralation between Dow Jones and Select International
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.92 times more return on investment than Select International. However, Dow Jones Industrial is 1.08 times less risky than Select International. It trades about 0.08 of its potential returns per unit of risk. Select International Equity is currently generating about 0.06 per unit of risk. If you would invest 3,396,635 in Dow Jones Industrial on September 4, 2024 and sell it today you would earn a total of 1,081,565 from holding Dow Jones Industrial or generate 31.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Dow Jones Industrial vs. Select International Equity
Performance |
| Timeline |
Dow Jones and Select International Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Select International Equity
Pair trading matchups for Select International
Pair Trading with Dow Jones and Select International
The main advantage of trading using opposite Dow Jones and Select International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Select International 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 Select International will offset losses from the drop in Select International's long position.| Dow Jones vs. Gentex | Dow Jones vs. American Axle Manufacturing | Dow Jones vs. Pearson PLC ADR | Dow Jones vs. Marine Products |
| Select International vs. International Developed Markets | Select International vs. Global Real Estate | Select International vs. Global Real Estate | Select International vs. Global Real Estate |
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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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