Correlation Between Dow Jones and Vanguard Global
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Vanguard Global 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 Vanguard Global 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 Vanguard Global Infrastructure, you can compare the effects of market volatilities on Dow Jones and Vanguard Global 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 Vanguard Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Vanguard Global.
Diversification Opportunities for Dow Jones and Vanguard Global
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and Vanguard is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Vanguard Global Infrastructure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Global Infr 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 Vanguard Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Global Infr has no effect on the direction of Dow Jones i.e., Dow Jones and Vanguard Global go up and down completely randomly.
Pair Corralation between Dow Jones and Vanguard Global
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.94 times more return on investment than Vanguard Global. However, Dow Jones Industrial is 1.06 times less risky than Vanguard Global. It trades about 0.08 of its potential returns per unit of risk. Vanguard Global Infrastructure is currently generating about 0.05 per unit of risk. If you would invest 3,378,148 in Dow Jones Industrial on August 29, 2024 and sell it today you would earn a total of 1,094,058 from holding Dow Jones Industrial or generate 32.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.4% |
| Values | Daily Returns |
Dow Jones Industrial vs. Vanguard Global Infrastructure
Performance |
| Timeline |
Dow Jones and Vanguard Global Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Vanguard Global Infrastructure
Pair trading matchups for Vanguard Global
Pair Trading with Dow Jones and Vanguard Global
The main advantage of trading using opposite Dow Jones and Vanguard Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Vanguard Global 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 Vanguard Global will offset losses from the drop in Vanguard Global's long position.| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
| Vanguard Global vs. BetaShares Geared Australian | Vanguard Global vs. BetaShares Global Robotics | Vanguard Global vs. iShares China LargeCap | Vanguard Global vs. Russell Australian Government |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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