Correlation Between Dow Jones and Xtrackers Russell
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Xtrackers Russell 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 Xtrackers Russell 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 Xtrackers Russell 2000, you can compare the effects of market volatilities on Dow Jones and Xtrackers Russell 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 Xtrackers Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Xtrackers Russell.
Diversification Opportunities for Dow Jones and Xtrackers Russell
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Dow and Xtrackers is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Xtrackers Russell 2000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers Russell 2000 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 Xtrackers Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers Russell 2000 has no effect on the direction of Dow Jones i.e., Dow Jones and Xtrackers Russell go up and down completely randomly.
Pair Corralation between Dow Jones and Xtrackers Russell
Assuming the 90 days trading horizon Dow Jones is expected to generate 2.15 times less return on investment than Xtrackers Russell. But when comparing it to its historical volatility, Dow Jones Industrial is 3.75 times less risky than Xtrackers Russell. It trades about 0.37 of its potential returns per unit of risk. Xtrackers Russell 2000 is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 27,165 in Xtrackers Russell 2000 on September 5, 2024 and sell it today you would earn a total of 4,390 from holding Xtrackers Russell 2000 or generate 16.16% 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. Xtrackers Russell 2000
Performance |
| Timeline |
Dow Jones and Xtrackers Russell Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Xtrackers Russell 2000
Pair trading matchups for Xtrackers Russell
Pair Trading with Dow Jones and Xtrackers Russell
The main advantage of trading using opposite Dow Jones and Xtrackers Russell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Xtrackers Russell 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 Xtrackers Russell will offset losses from the drop in Xtrackers Russell's long position.| Dow Jones vs. Shake Shack | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. Dave Busters Entertainment | Dow Jones vs. Meli Hotels International |
| Xtrackers Russell vs. Xtrackers MSCI USA | Xtrackers Russell vs. Xtrackers USD Corporate | Xtrackers Russell vs. Xtrackers MSCI AC | Xtrackers Russell vs. Xtrackers MSCI World |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
Other Complementary Tools
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins |