Correlation Between SPDR SPASX and Dow Jones
Can any of the company-specific risk be diversified away by investing in both SPDR SPASX and Dow Jones 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 SPDR SPASX and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SPASX 200 and Dow Jones Industrial, you can compare the effects of market volatilities on SPDR SPASX and Dow Jones 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 SPDR SPASX with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SPASX and Dow Jones.
Diversification Opportunities for SPDR SPASX and Dow Jones
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between SPDR and Dow is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SPASX 200 and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and SPDR SPASX 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 SPDR SPASX 200 are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of SPDR SPASX i.e., SPDR SPASX and Dow Jones go up and down completely randomly.
Pair Corralation between SPDR SPASX and Dow Jones
Assuming the 90 days trading horizon SPDR SPASX is expected to generate 1.9 times less return on investment than Dow Jones. But when comparing it to its historical volatility, SPDR SPASX 200 is 1.46 times less risky than Dow Jones. It trades about 0.19 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 4,238,757 in Dow Jones Industrial on August 29, 2024 and sell it today you would earn a total of 233,449 from holding Dow Jones Industrial or generate 5.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR SPASX 200 vs. Dow Jones Industrial
Performance |
| Timeline |
SPDR SPASX and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
SPDR SPASX 200
Pair trading matchups for SPDR SPASX
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with SPDR SPASX and Dow Jones
The main advantage of trading using opposite SPDR SPASX and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SPASX position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| SPDR SPASX vs. SPDR SPASX 200 | SPDR SPASX vs. SPDR SPASX 50 | SPDR SPASX vs. SPDR MSCI World | SPDR SPASX vs. SPDR Dow Jones |
| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
Other Complementary Tools
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years |