Correlation Between OShares Small and Dow Jones
Can any of the company-specific risk be diversified away by investing in both OShares Small 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 OShares Small and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between OShares Small Cap Quality and Dow Jones Industrial, you can compare the effects of market volatilities on OShares Small 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 OShares Small with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of OShares Small and Dow Jones.
Diversification Opportunities for OShares Small and Dow Jones
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between OShares and Dow is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding OShares Small Cap Quality 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 OShares Small 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 OShares Small Cap Quality 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 OShares Small i.e., OShares Small and Dow Jones go up and down completely randomly.
Pair Corralation between OShares Small and Dow Jones
Given the investment horizon of 90 days OShares Small Cap Quality is expected to generate 1.26 times more return on investment than Dow Jones. However, OShares Small is 1.26 times more volatile than Dow Jones Industrial. It trades about 0.08 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.08 per unit of risk. If you would invest 3,358 in OShares Small Cap Quality on August 24, 2024 and sell it today you would earn a total of 1,286 from holding OShares Small Cap Quality or generate 38.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
OShares Small Cap Quality vs. Dow Jones Industrial
Performance |
| Timeline |
OShares Small and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
OShares Small Cap Quality
Pair trading matchups for OShares Small
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with OShares Small and Dow Jones
The main advantage of trading using opposite OShares Small and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OShares Small 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.| OShares Small vs. OShares Quality Dividend | OShares Small vs. OShares Europe Quality | OShares Small vs. OShares Global Internet | OShares Small vs. ProShares SP MidCap |
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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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