Correlation Between Dow Jones and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both Dow Jones and IShares MSCI 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 MSCI 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 MSCI EAFE, you can compare the effects of market volatilities on Dow Jones and IShares MSCI 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 MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and IShares MSCI.
Diversification Opportunities for Dow Jones and IShares MSCI
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Dow and IShares is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and iShares MSCI EAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI EAFE 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 MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI EAFE has no effect on the direction of Dow Jones i.e., Dow Jones and IShares MSCI go up and down completely randomly.
Pair Corralation between Dow Jones and IShares MSCI
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.69 times more return on investment than IShares MSCI. However, Dow Jones is 1.69 times more volatile than iShares MSCI EAFE. It trades about 0.19 of its potential returns per unit of risk. iShares MSCI EAFE is currently generating about -0.06 per unit of risk. If you would invest 4,251,495 in Dow Jones Industrial on August 24, 2024 and sell it today you would earn a total of 178,156 from holding Dow Jones Industrial or generate 4.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. iShares MSCI EAFE
Performance |
| Timeline |
Dow Jones and IShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
iShares MSCI EAFE
Pair trading matchups for IShares MSCI
Pair Trading with Dow Jones and IShares MSCI
The main advantage of trading using opposite Dow Jones and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, IShares MSCI 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 MSCI will offset losses from the drop in IShares MSCI's long position.| Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. Perseus Mining Limited | Dow Jones vs. Titan Machinery | Dow Jones vs. Simon Property Group |
| IShares MSCI vs. iShares Core MSCI | IShares MSCI vs. Vanguard FTSE Developed | IShares MSCI vs. iShares Core MSCI | IShares MSCI vs. BMO MSCI EAFE |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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