Correlation Between IShares Treasury and Dow Jones
Can any of the company-specific risk be diversified away by investing in both IShares Treasury 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 IShares Treasury and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Treasury Bond and Dow Jones Industrial, you can compare the effects of market volatilities on IShares Treasury 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 IShares Treasury with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Treasury and Dow Jones.
Diversification Opportunities for IShares Treasury and Dow Jones
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between IShares and Dow is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding iShares Treasury Bond 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 IShares Treasury 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 iShares Treasury Bond 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 IShares Treasury i.e., IShares Treasury and Dow Jones go up and down completely randomly.
Pair Corralation between IShares Treasury and Dow Jones
Given the investment horizon of 90 days IShares Treasury is expected to generate 17.22 times less return on investment than Dow Jones. But when comparing it to its historical volatility, iShares Treasury Bond is 2.78 times less risky than Dow Jones. It trades about 0.04 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.26 of returns per unit of risk over similar time horizon. 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 234,900 from holding Dow Jones Industrial or generate 5.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Treasury Bond vs. Dow Jones Industrial
Performance |
| Timeline |
IShares Treasury and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
iShares Treasury Bond
Pair trading matchups for IShares Treasury
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with IShares Treasury and Dow Jones
The main advantage of trading using opposite IShares Treasury and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Treasury 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.| IShares Treasury vs. iShares MBS ETF | IShares Treasury vs. iShares Core Total | IShares Treasury vs. iShares 3 7 Year | IShares Treasury vs. iShares 10 20 Year |
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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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