Correlation Between Dow Jones and International Growth
Can any of the company-specific risk be diversified away by investing in both Dow Jones and International Growth 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 Growth 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 Growth Fund, you can compare the effects of market volatilities on Dow Jones and International Growth 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 Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and International Growth.
Diversification Opportunities for Dow Jones and International Growth
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dow and International is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and International Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Growth 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 Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Growth has no effect on the direction of Dow Jones i.e., Dow Jones and International Growth go up and down completely randomly.
Pair Corralation between Dow Jones and International Growth
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.27 times more return on investment than International Growth. However, Dow Jones is 1.27 times more volatile than International Growth Fund. It trades about 0.15 of its potential returns per unit of risk. International Growth Fund is currently generating about -0.19 per unit of risk. If you would invest 4,251,495 in Dow Jones Industrial on August 24, 2024 and sell it today you would earn a total of 135,540 from holding Dow Jones Industrial or generate 3.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. International Growth Fund
Performance |
| Timeline |
Dow Jones and International Growth Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
International Growth Fund
Pair trading matchups for International Growth
Pair Trading with Dow Jones and International Growth
The main advantage of trading using opposite Dow Jones and International Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, International Growth 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 Growth will offset losses from the drop in International Growth's long position.| Dow Jones vs. Barrick Gold Corp | Dow Jones vs. Jutal Offshore Oil | Dow Jones vs. Eastern Co | Dow Jones vs. Weyco Group |
| International Growth vs. Europacific Growth Fund | International Growth vs. HUMANA INC | International Growth vs. Aquagold International | International Growth vs. Barloworld Ltd ADR |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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