Correlation Between DSJA and IShares VII
Can any of the company-specific risk be diversified away by investing in both DSJA and IShares VII 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 DSJA and IShares VII into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DSJA and iShares VII Public, you can compare the effects of market volatilities on DSJA and IShares VII 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 DSJA with a short position of IShares VII. Check out your portfolio center. Please also check ongoing floating volatility patterns of DSJA and IShares VII.
Diversification Opportunities for DSJA and IShares VII
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between DSJA and IShares is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding DSJA and iShares VII Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares VII Public and DSJA 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 DSJA are associated (or correlated) with IShares VII. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares VII Public has no effect on the direction of DSJA i.e., DSJA and IShares VII go up and down completely randomly.
Pair Corralation between DSJA and IShares VII
Given the investment horizon of 90 days DSJA is expected to generate 1.21 times less return on investment than IShares VII. But when comparing it to its historical volatility, DSJA is 4.03 times less risky than IShares VII. It trades about 0.35 of its potential returns per unit of risk. iShares VII Public is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 45,760 in iShares VII Public on September 12, 2024 and sell it today you would earn a total of 18,007 from holding iShares VII Public or generate 39.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 6.68% |
| Values | Daily Returns |
DSJA vs. iShares VII Public
Performance |
| Timeline |
| DSJA |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| iShares VII Public |
DSJA and IShares VII Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DSJA and IShares VII
The main advantage of trading using opposite DSJA and IShares VII positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DSJA position performs unexpectedly, IShares VII 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 VII will offset losses from the drop in IShares VII's long position.The idea behind DSJA and iShares VII Public pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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