Correlation Between IShares Insurance and Dow Jones
Can any of the company-specific risk be diversified away by investing in both IShares Insurance 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 Insurance 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 Insurance ETF and Dow Jones Industrial, you can compare the effects of market volatilities on IShares Insurance 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 Insurance with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Insurance and Dow Jones.
Diversification Opportunities for IShares Insurance and Dow Jones
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and Dow is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding iShares Insurance ETF 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 Insurance 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 Insurance ETF 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 Insurance i.e., IShares Insurance and Dow Jones go up and down completely randomly.
Pair Corralation between IShares Insurance and Dow Jones
Considering the 90-day investment horizon iShares Insurance ETF is expected to generate 1.31 times more return on investment than Dow Jones. However, IShares Insurance is 1.31 times more volatile than Dow Jones Industrial. It trades about 0.15 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.1 per unit of risk. If you would invest 9,917 in iShares Insurance ETF on August 25, 2024 and sell it today you would earn a total of 3,686 from holding iShares Insurance ETF or generate 37.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Insurance ETF vs. Dow Jones Industrial
Performance |
| Timeline |
IShares Insurance and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
iShares Insurance ETF
Pair trading matchups for IShares Insurance
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with IShares Insurance and Dow Jones
The main advantage of trading using opposite IShares Insurance and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Insurance 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 Insurance vs. iShares Broker Dealers Securities | IShares Insurance vs. SPDR SP Insurance | IShares Insurance vs. iShares Regional Banks | IShares Insurance vs. iShares Pharmaceuticals ETF |
| Dow Jones vs. Vistra Energy Corp | Dow Jones vs. Fluence Energy | Dow Jones vs. Old Republic International | Dow Jones vs. Empresa Distribuidora y |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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