Correlation Between Dow Jones and Vanguard Total
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Vanguard Total 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 Total 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 Total Stock, you can compare the effects of market volatilities on Dow Jones and Vanguard Total 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 Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Vanguard Total.
Diversification Opportunities for Dow Jones and Vanguard Total
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dow and Vanguard is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Vanguard Total Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Stock 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 Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Stock has no effect on the direction of Dow Jones i.e., Dow Jones and Vanguard Total go up and down completely randomly.
Pair Corralation between Dow Jones and Vanguard Total
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.08 times more return on investment than Vanguard Total. However, Dow Jones is 1.08 times more volatile than Vanguard Total Stock. It trades about 0.29 of its potential returns per unit of risk. Vanguard Total Stock is currently generating about 0.21 per unit of risk. If you would invest 4,214,154 in Dow Jones Industrial on August 31, 2024 and sell it today you would earn a total of 258,052 from holding Dow Jones Industrial or generate 6.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Vanguard Total Stock
Performance |
| Timeline |
Dow Jones and Vanguard Total Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Vanguard Total Stock
Pair trading matchups for Vanguard Total
Pair Trading with Dow Jones and Vanguard Total
The main advantage of trading using opposite Dow Jones and Vanguard Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Vanguard Total 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 Total will offset losses from the drop in Vanguard Total's long position.| Dow Jones vs. Aerofoam Metals | Dow Jones vs. ACG Metals Limited | Dow Jones vs. China Clean Energy | Dow Jones vs. Fast Retailing Co |
| Vanguard Total vs. Rbc Global Equity | Vanguard Total vs. Ultra Short Fixed Income | Vanguard Total vs. Ms Global Fixed | Vanguard Total vs. Cutler Equity |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
Other Complementary Tools
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges |