Correlation Between IShares Inflation and Dow Jones
Can any of the company-specific risk be diversified away by investing in both IShares Inflation 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 Inflation 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 Inflation Hedged and Dow Jones Industrial, you can compare the effects of market volatilities on IShares Inflation 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 Inflation with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Inflation and Dow Jones.
Diversification Opportunities for IShares Inflation and Dow Jones
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between IShares and Dow is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares Inflation Hedged 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 Inflation 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 Inflation Hedged 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 Inflation i.e., IShares Inflation and Dow Jones go up and down completely randomly.
Pair Corralation between IShares Inflation and Dow Jones
If you would invest 4,156,308 in Dow Jones Industrial on August 30, 2024 and sell it today you would earn a total of 315,898 from holding Dow Jones Industrial or generate 7.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 1.56% |
| Values | Daily Returns |
iShares Inflation Hedged vs. Dow Jones Industrial
Performance |
| Timeline |
IShares Inflation and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
iShares Inflation Hedged
Pair trading matchups for IShares Inflation
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against IShares Inflation as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. IShares Inflation's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, IShares Inflation's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to iShares Inflation Hedged.
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with IShares Inflation and Dow Jones
The main advantage of trading using opposite IShares Inflation and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Inflation 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.The idea behind iShares Inflation Hedged and Dow Jones Industrial pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Dow Jones vs. Aerofoam Metals | Dow Jones vs. ACG Metals Limited | Dow Jones vs. China Clean Energy | Dow Jones vs. Fast Retailing Co |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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