Correlation Between Exchange Listed and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Exchange Listed 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 Exchange Listed and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Exchange Listed Funds and Dow Jones Industrial, you can compare the effects of market volatilities on Exchange Listed 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 Exchange Listed with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exchange Listed and Dow Jones.
Diversification Opportunities for Exchange Listed and Dow Jones
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Exchange and Dow is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Exchange Listed Funds 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 Exchange Listed 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 Exchange Listed Funds 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 Exchange Listed i.e., Exchange Listed and Dow Jones go up and down completely randomly.
Pair Corralation between Exchange Listed and Dow Jones
Given the investment horizon of 90 days Exchange Listed is expected to generate 1.6 times less return on investment than Dow Jones. But when comparing it to its historical volatility, Exchange Listed Funds is 1.26 times less risky than Dow Jones. It trades about 0.04 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 4,307,770 in Dow Jones Industrial on September 16, 2024 and sell it today you would earn a total of 75,036 from holding Dow Jones Industrial or generate 1.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Exchange Listed Funds vs. Dow Jones Industrial
Performance |
| Timeline |
Exchange Listed and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Exchange Listed Funds
Pair trading matchups for Exchange Listed
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Exchange Listed and Dow Jones
The main advantage of trading using opposite Exchange Listed and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exchange Listed 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.| Exchange Listed vs. ProShares SP 500 | Exchange Listed vs. American Century Quality | Exchange Listed vs. DBX ETF Trust | Exchange Listed vs. Xtrackers Short Duration |
| Dow Jones vs. Awilco Drilling PLC | Dow Jones vs. Dine Brands Global | Dow Jones vs. Meli Hotels International | Dow Jones vs. Boyd Gaming |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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