Correlation Between Russell Australian and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Russell Australian 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 Russell Australian and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Russell Australian SemiGovernment and Dow Jones Industrial, you can compare the effects of market volatilities on Russell Australian 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 Russell Australian with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Russell Australian and Dow Jones.
Diversification Opportunities for Russell Australian and Dow Jones
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Russell and Dow is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Russell Australian SemiGovernm 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 Russell Australian 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 Russell Australian SemiGovernment 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 Russell Australian i.e., Russell Australian and Dow Jones go up and down completely randomly.
Pair Corralation between Russell Australian and Dow Jones
Assuming the 90 days trading horizon Russell Australian is expected to generate 9.59 times less return on investment than Dow Jones. But when comparing it to its historical volatility, Russell Australian SemiGovernment is 4.4 times less risky than Dow Jones. It trades about 0.17 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 4,179,460 in Dow Jones Industrial on September 4, 2024 and sell it today you would earn a total of 298,740 from holding Dow Jones Industrial or generate 7.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 90.91% |
| Values | Daily Returns |
Russell Australian SemiGovernm vs. Dow Jones Industrial
Performance |
| Timeline |
Russell Australian and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Russell Australian SemiGovernment
Pair trading matchups for Russell Australian
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Russell Australian and Dow Jones
The main advantage of trading using opposite Russell Australian and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Russell Australian 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.| Russell Australian vs. BetaShares Global Government | Russell Australian vs. BetaShares Geared Australian | Russell Australian vs. Global X Semiconductor | Russell Australian vs. iShares UBS Government |
| Dow Jones vs. Gentex | Dow Jones vs. American Axle Manufacturing | Dow Jones vs. Pearson PLC ADR | Dow Jones vs. Marine Products |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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