Correlation Between IShares SP and Mini Dow
Can any of the company-specific risk be diversified away by investing in both IShares SP and Mini Dow 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 SP and Mini Dow into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares SP 100 and Mini Dow Jones, you can compare the effects of market volatilities on IShares SP and Mini Dow 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 SP with a short position of Mini Dow. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and Mini Dow.
Diversification Opportunities for IShares SP and Mini Dow
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and Mini is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP 100 and Mini Dow Jones in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mini Dow Jones and IShares SP 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 SP 100 are associated (or correlated) with Mini Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mini Dow Jones has no effect on the direction of IShares SP i.e., IShares SP and Mini Dow go up and down completely randomly.
Pair Corralation between IShares SP and Mini Dow
Considering the 90-day investment horizon IShares SP is expected to generate 1.01 times less return on investment than Mini Dow. But when comparing it to its historical volatility, iShares SP 100 is 1.04 times less risky than Mini Dow. It trades about 0.12 of its potential returns per unit of risk. Mini Dow Jones is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 4,259,700 in Mini Dow Jones on August 25, 2024 and sell it today you would earn a total of 182,000 from holding Mini Dow Jones or generate 4.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares SP 100 vs. Mini Dow Jones
Performance |
| Timeline |
| iShares SP 100 |
| Mini Dow Jones |
IShares SP and Mini Dow Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares SP and Mini Dow
The main advantage of trading using opposite IShares SP and Mini Dow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SP position performs unexpectedly, Mini Dow 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 Mini Dow will offset losses from the drop in Mini Dow's long position.| IShares SP vs. iShares Russell 1000 | IShares SP vs. iShares SP Mid Cap | IShares SP vs. iShares Russell 3000 | IShares SP vs. iShares SP Mid Cap |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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