Correlation Between Dow Jones and SSgA SPDR
Can any of the company-specific risk be diversified away by investing in both Dow Jones and SSgA SPDR 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 SSgA SPDR 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 SSgA SPDR ETFs, you can compare the effects of market volatilities on Dow Jones and SSgA SPDR 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 SSgA SPDR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and SSgA SPDR.
Diversification Opportunities for Dow Jones and SSgA SPDR
Very poor diversification
The 3 months correlation between Dow and SSgA is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and SSgA SPDR ETFs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSgA SPDR ETFs 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 SSgA SPDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSgA SPDR ETFs has no effect on the direction of Dow Jones i.e., Dow Jones and SSgA SPDR go up and down completely randomly.
Pair Corralation between Dow Jones and SSgA SPDR
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 2.08 times more return on investment than SSgA SPDR. However, Dow Jones is 2.08 times more volatile than SSgA SPDR ETFs. It trades about 0.16 of its potential returns per unit of risk. SSgA SPDR ETFs is currently generating about 0.21 per unit of risk. If you would invest 4,109,677 in Dow Jones Industrial on September 12, 2024 and sell it today you would earn a total of 315,106 from holding Dow Jones Industrial or generate 7.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.44% |
| Values | Daily Returns |
Dow Jones Industrial vs. SSgA SPDR ETFs
Performance |
| Timeline |
Dow Jones and SSgA SPDR Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
SSgA SPDR ETFs
Pair trading matchups for SSgA SPDR
Pair Trading with Dow Jones and SSgA SPDR
The main advantage of trading using opposite Dow Jones and SSgA SPDR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, SSgA SPDR 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 SSgA SPDR will offset losses from the drop in SSgA SPDR's long position.| Dow Jones vs. Aeye Inc | Dow Jones vs. Gentex | Dow Jones vs. Marine Products | Dow Jones vs. CarsalesCom Ltd ADR |
| SSgA SPDR vs. SSgA SPDR ETFs | SSgA SPDR vs. SSgA SPDR ETFs | SSgA SPDR vs. SSgA SPDR ETFs | SSgA SPDR vs. SSgA SPDR ETFs |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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