Correlation Between Dow Jones and IShares Core
Can any of the company-specific risk be diversified away by investing in both Dow Jones and IShares Core 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 Core 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 Core SP, you can compare the effects of market volatilities on Dow Jones and IShares Core 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 Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and IShares Core.
Diversification Opportunities for Dow Jones and IShares Core
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dow and IShares is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and iShares Core SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core SP 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 Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core SP has no effect on the direction of Dow Jones i.e., Dow Jones and IShares Core go up and down completely randomly.
Pair Corralation between Dow Jones and IShares Core
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.12 times more return on investment than IShares Core. However, Dow Jones is 1.12 times more volatile than iShares Core SP. It trades about 0.27 of its potential returns per unit of risk. iShares Core SP is currently generating about 0.15 per unit of risk. If you would invest 4,238,757 in Dow Jones Industrial on August 28, 2024 and sell it today you would earn a total of 247,274 from holding Dow Jones Industrial or generate 5.83% 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. iShares Core SP
Performance |
| Timeline |
Dow Jones and IShares Core Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
iShares Core SP
Pair trading matchups for IShares Core
Pair Trading with Dow Jones and IShares Core
The main advantage of trading using opposite Dow Jones and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, IShares Core 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 Core will offset losses from the drop in IShares Core's long position.| Dow Jones vs. CECO Environmental Corp | Dow Jones vs. Western Acquisition Ventures | Dow Jones vs. Tyson Foods | Dow Jones vs. Inflection Point Acquisition |
| IShares Core vs. iShares SPTSX 60 | IShares Core vs. iShares MSCI EAFE | IShares Core vs. iShares Core SPTSX | IShares Core vs. iShares SPTSX Capped |
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 Stocks Directory module to find actively traded stocks across global markets.
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