Correlation Between Dow Jones and SPDR Portfolio
Can any of the company-specific risk be diversified away by investing in both Dow Jones and SPDR Portfolio 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 SPDR Portfolio 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 SPDR Portfolio Aggregate, you can compare the effects of market volatilities on Dow Jones and SPDR Portfolio 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 SPDR Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and SPDR Portfolio.
Diversification Opportunities for Dow Jones and SPDR Portfolio
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dow and SPDR is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and SPDR Portfolio Aggregate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Portfolio Aggregate 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 SPDR Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Portfolio Aggregate has no effect on the direction of Dow Jones i.e., Dow Jones and SPDR Portfolio go up and down completely randomly.
Pair Corralation between Dow Jones and SPDR Portfolio
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 2.63 times more return on investment than SPDR Portfolio. However, Dow Jones is 2.63 times more volatile than SPDR Portfolio Aggregate. It trades about 0.26 of its potential returns per unit of risk. SPDR Portfolio Aggregate is currently generating about 0.08 per unit of risk. If you would invest 4,238,757 in Dow Jones Industrial on August 27, 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 Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. SPDR Portfolio Aggregate
Performance |
| Timeline |
Dow Jones and SPDR Portfolio Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
SPDR Portfolio Aggregate
Pair trading matchups for SPDR Portfolio
Pair Trading with Dow Jones and SPDR Portfolio
The main advantage of trading using opposite Dow Jones and SPDR Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, SPDR Portfolio 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 SPDR Portfolio will offset losses from the drop in SPDR Portfolio'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 |
| SPDR Portfolio vs. iShares MSCI EAFE | SPDR Portfolio vs. iShares iBoxx Investment | SPDR Portfolio vs. iShares TIPS Bond | SPDR Portfolio vs. iShares 1 3 Year |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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