Correlation Between NEOS Russell and Dow Jones
Can any of the company-specific risk be diversified away by investing in both NEOS Russell 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 NEOS Russell and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NEOS Russell 2000 and Dow Jones Industrial, you can compare the effects of market volatilities on NEOS Russell 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 NEOS Russell with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of NEOS Russell and Dow Jones.
Diversification Opportunities for NEOS Russell and Dow Jones
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NEOS and Dow is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding NEOS Russell 2000 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 NEOS Russell 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 NEOS Russell 2000 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 NEOS Russell i.e., NEOS Russell and Dow Jones go up and down completely randomly.
Pair Corralation between NEOS Russell and Dow Jones
Given the investment horizon of 90 days NEOS Russell is expected to generate 1.6 times less return on investment than Dow Jones. In addition to that, NEOS Russell is 1.1 times more volatile than Dow Jones Industrial. It trades about 0.19 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.33 per unit of volatility. If you would invest 4,263,520 in Dow Jones Industrial on November 9, 2024 and sell it today you would earn a total of 211,243 from holding Dow Jones Industrial or generate 4.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NEOS Russell 2000 vs. Dow Jones Industrial
Performance |
| Timeline |
NEOS Russell and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
NEOS Russell 2000
Pair trading matchups for NEOS Russell
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with NEOS Russell and Dow Jones
The main advantage of trading using opposite NEOS Russell and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NEOS Russell 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.| NEOS Russell vs. Dimensional ETF Trust | NEOS Russell vs. Vanguard Small Cap Index | NEOS Russell vs. First Trust Multi Manager | NEOS Russell vs. Vanguard SP Small Cap |
| Dow Jones vs. Douglas Emmett | Dow Jones vs. Todos Medical | Dow Jones vs. Eastern Co | Dow Jones vs. Merit Medical Systems |
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.
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