Correlation Between IShares Preferred and Dow Jones
Can any of the company-specific risk be diversified away by investing in both IShares Preferred 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 Preferred 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 Preferred and and Dow Jones Industrial, you can compare the effects of market volatilities on IShares Preferred 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 Preferred with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Preferred and Dow Jones.
Diversification Opportunities for IShares Preferred and Dow Jones
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IShares and Dow is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding iShares Preferred and 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 Preferred 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 Preferred and 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 Preferred i.e., IShares Preferred and Dow Jones go up and down completely randomly.
Pair Corralation between IShares Preferred and Dow Jones
Considering the 90-day investment horizon iShares Preferred and is expected to under-perform the Dow Jones. But the etf apears to be less risky and, when comparing its historical volatility, iShares Preferred and is 1.83 times less risky than Dow Jones. The etf trades about -0.04 of its potential returns per unit of risk. The Dow Jones Industrial is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 4,237,436 in Dow Jones Industrial on August 25, 2024 and sell it today you would earn a total of 192,215 from holding Dow Jones Industrial or generate 4.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
iShares Preferred and vs. Dow Jones Industrial
Performance |
| Timeline |
IShares Preferred and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
iShares Preferred and
Pair trading matchups for IShares Preferred
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with IShares Preferred and Dow Jones
The main advantage of trading using opposite IShares Preferred and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Preferred 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 Preferred vs. ETF Series Solutions | IShares Preferred vs. Aquagold International | IShares Preferred vs. Morningstar Unconstrained Allocation | IShares Preferred vs. High Yield Municipal Fund |
| Dow Jones vs. Vistra Energy Corp | Dow Jones vs. Fluence Energy | Dow Jones vs. Old Republic International | Dow Jones vs. Empresa Distribuidora y |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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