Correlation Between Dow Jones and IShares Canadian
Can any of the company-specific risk be diversified away by investing in both Dow Jones and IShares Canadian 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 IShares Canadian 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 iShares Canadian Universe, you can compare the effects of market volatilities on Dow Jones and IShares Canadian 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 IShares Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and IShares Canadian.
Diversification Opportunities for Dow Jones and IShares Canadian
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Dow and IShares is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and iShares Canadian Universe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Canadian Universe 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 IShares Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Canadian Universe has no effect on the direction of Dow Jones i.e., Dow Jones and IShares Canadian go up and down completely randomly.
Pair Corralation between Dow Jones and IShares Canadian
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.59 times more return on investment than IShares Canadian. However, Dow Jones is 1.59 times more volatile than iShares Canadian Universe. It trades about 0.12 of its potential returns per unit of risk. iShares Canadian Universe is currently generating about 0.07 per unit of risk. If you would invest 3,383,361 in Dow Jones Industrial on August 31, 2024 and sell it today you would earn a total of 1,107,704 from holding Dow Jones Industrial or generate 32.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.73% |
| Values | Daily Returns |
Dow Jones Industrial vs. iShares Canadian Universe
Performance |
| Timeline |
Dow Jones and IShares Canadian Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
iShares Canadian Universe
Pair trading matchups for IShares Canadian
Pair Trading with Dow Jones and IShares Canadian
The main advantage of trading using opposite Dow Jones and IShares Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, IShares Canadian 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 IShares Canadian will offset losses from the drop in IShares Canadian'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 |
| IShares Canadian vs. iShares Canadian Short | IShares Canadian vs. iShares MSCI EAFE | IShares Canadian vs. iShares Core Canadian | IShares Canadian vs. iShares Canadian Real |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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