Correlation Between IShares MSCI and Dow Jones
Can any of the company-specific risk be diversified away by investing in both IShares MSCI 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 MSCI 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 MSCI Global and Dow Jones Industrial, you can compare the effects of market volatilities on IShares MSCI 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 MSCI with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and Dow Jones.
Diversification Opportunities for IShares MSCI and Dow Jones
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IShares and Dow is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Global 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 MSCI 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 MSCI Global 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 MSCI i.e., IShares MSCI and Dow Jones go up and down completely randomly.
Pair Corralation between IShares MSCI and Dow Jones
Considering the 90-day investment horizon iShares MSCI Global is expected to under-perform the Dow Jones. But the etf apears to be less risky and, when comparing its historical volatility, iShares MSCI Global is 1.19 times less risky than Dow Jones. The etf trades about -0.17 of its potential returns per unit of risk. The Dow Jones Industrial is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 4,184,163 in Dow Jones Industrial on January 14, 2025 and sell it today you would lose (131,684) from holding Dow Jones Industrial or give up 3.15% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
iShares MSCI Global vs. Dow Jones Industrial
Performance |
| Timeline |
IShares MSCI and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
iShares MSCI Global
Pair trading matchups for IShares MSCI
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with IShares MSCI and Dow Jones
The main advantage of trading using opposite IShares MSCI and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI 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 MSCI vs. Davis Select Financial | IShares MSCI vs. Davis Select International | IShares MSCI vs. First Trust Multi | IShares MSCI vs. First Trust Dorsey |
| Dow Jones vs. Guangdong Investment Limited | Dow Jones vs. Presidio Property Trust | Dow Jones vs. Comstock Holding Companies | Dow Jones vs. Old Republic International |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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