Correlation Between Dow Jones and Vanguard USD
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Vanguard USD 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 USD 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 USD Emerging, you can compare the effects of market volatilities on Dow Jones and Vanguard USD 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 USD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Vanguard USD.
Diversification Opportunities for Dow Jones and Vanguard USD
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Dow and Vanguard is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Vanguard USD Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard USD Emerging 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 USD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard USD Emerging has no effect on the direction of Dow Jones i.e., Dow Jones and Vanguard USD go up and down completely randomly.
Pair Corralation between Dow Jones and Vanguard USD
Assuming the 90 days trading horizon Dow Jones is expected to generate 2.1 times less return on investment than Vanguard USD. In addition to that, Dow Jones is 1.76 times more volatile than Vanguard USD Emerging. It trades about 0.11 of its total potential returns per unit of risk. Vanguard USD Emerging is currently generating about 0.39 per unit of volatility. If you would invest 5,034 in Vanguard USD Emerging on October 21, 2024 and sell it today you would earn a total of 132.00 from holding Vanguard USD Emerging or generate 2.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 80.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Vanguard USD Emerging
Performance |
| Timeline |
Dow Jones and Vanguard USD Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Vanguard USD Emerging
Pair trading matchups for Vanguard USD
Pair Trading with Dow Jones and Vanguard USD
The main advantage of trading using opposite Dow Jones and Vanguard USD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Vanguard USD 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 USD will offset losses from the drop in Vanguard USD's long position.| Dow Jones vs. SkyWest | Dow Jones vs. Air Transport Services | Dow Jones vs. LATAM Airlines Group | Dow Jones vs. Emerson Radio |
| Vanguard USD vs. Vanguard FTSE Emerging | Vanguard USD vs. Vanguard FTSE Developed | Vanguard USD vs. Vanguard FTSE Japan | Vanguard USD vs. Vanguard EUR Eurozone |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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