Correlation Between Dow Jones and SPDR SSgA
Can any of the company-specific risk be diversified away by investing in both Dow Jones and SPDR SSgA 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 SSgA 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 SSgA Ultra, you can compare the effects of market volatilities on Dow Jones and SPDR SSgA 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 SSgA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and SPDR SSgA.
Diversification Opportunities for Dow Jones and SPDR SSgA
Poor diversification
The 3 months correlation between Dow and SPDR is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and SPDR SSgA Ultra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SSgA Ultra 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 SSgA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SSgA Ultra has no effect on the direction of Dow Jones i.e., Dow Jones and SPDR SSgA go up and down completely randomly.
Pair Corralation between Dow Jones and SPDR SSgA
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 21.24 times more return on investment than SPDR SSgA. However, Dow Jones is 21.24 times more volatile than SPDR SSgA Ultra. It trades about 0.26 of its potential returns per unit of risk. SPDR SSgA Ultra is currently generating about 0.4 per unit of risk. If you would invest 4,238,757 in Dow Jones Industrial on August 28, 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 Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. SPDR SSgA Ultra
Performance |
| Timeline |
Dow Jones and SPDR SSgA Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
SPDR SSgA Ultra
Pair trading matchups for SPDR SSgA
Pair Trading with Dow Jones and SPDR SSgA
The main advantage of trading using opposite Dow Jones and SPDR SSgA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, SPDR SSgA 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 SSgA will offset losses from the drop in SPDR SSgA'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 SSgA vs. SPDR Bloomberg Investment | SPDR SSgA vs. SPDR Bloomberg 1 10 | SPDR SSgA vs. iShares Short Maturity | SPDR SSgA vs. Invesco Ultra Short |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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