Correlation Between IShares Developed and Dow Jones
Can any of the company-specific risk be diversified away by investing in both IShares Developed 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 Developed 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 Developed Markets and Dow Jones Industrial, you can compare the effects of market volatilities on IShares Developed 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 Developed with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Developed and Dow Jones.
Diversification Opportunities for IShares Developed and Dow Jones
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and Dow is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding iShares Developed Markets 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 Developed 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 Developed Markets 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 Developed i.e., IShares Developed and Dow Jones go up and down completely randomly.
Pair Corralation between IShares Developed and Dow Jones
Assuming the 90 days trading horizon IShares Developed is expected to generate 1.19 times less return on investment than Dow Jones. In addition to that, IShares Developed is 1.09 times more volatile than Dow Jones Industrial. It trades about 0.1 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.13 per unit of volatility. If you would invest 3,611,738 in Dow Jones Industrial on September 2, 2024 and sell it today you would earn a total of 879,327 from holding Dow Jones Industrial or generate 24.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.41% |
| Values | Daily Returns |
iShares Developed Markets vs. Dow Jones Industrial
Performance |
| Timeline |
IShares Developed and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
iShares Developed Markets
Pair trading matchups for IShares Developed
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with IShares Developed and Dow Jones
The main advantage of trading using opposite IShares Developed and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Developed 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 Developed vs. BlackRock ESG Multi Asset | IShares Developed vs. Pershing Square Holdings | IShares Developed vs. ASML Holding NV | IShares Developed vs. Koninklijke Philips NV |
| Dow Jones vs. Dream Finders Homes | Dow Jones vs. GEN Restaurant Group, | Dow Jones vs. National Beverage Corp | Dow Jones vs. BJs Restaurants |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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