Correlation Between IShares FTSE and Dow Jones
Can any of the company-specific risk be diversified away by investing in both IShares FTSE 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 FTSE 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 FTSE MIB and Dow Jones Industrial, you can compare the effects of market volatilities on IShares FTSE 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 FTSE with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares FTSE and Dow Jones.
Diversification Opportunities for IShares FTSE and Dow Jones
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between IShares and Dow is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding iShares FTSE MIB 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 FTSE 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 FTSE MIB 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 FTSE i.e., IShares FTSE and Dow Jones go up and down completely randomly.
Pair Corralation between IShares FTSE and Dow Jones
Assuming the 90 days trading horizon iShares FTSE MIB is expected to under-perform the Dow Jones. But the etf apears to be less risky and, when comparing its historical volatility, iShares FTSE MIB is 1.17 times less risky than Dow Jones. The etf trades about -0.13 of its potential returns per unit of risk. The Dow Jones Industrial is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 4,214,154 in Dow Jones Industrial on August 31, 2024 and sell it today you would earn a total of 258,052 from holding Dow Jones Industrial or generate 6.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares FTSE MIB vs. Dow Jones Industrial
Performance |
| Timeline |
IShares FTSE and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
iShares FTSE MIB
Pair trading matchups for IShares FTSE
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with IShares FTSE and Dow Jones
The main advantage of trading using opposite IShares FTSE and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares FTSE 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 FTSE vs. iShares Govt Bond | IShares FTSE vs. iShares Global AAA AA | IShares FTSE vs. iShares Smart City | IShares FTSE vs. iShares Broad High |
| Dow Jones vs. Aerofoam Metals | Dow Jones vs. ACG Metals Limited | Dow Jones vs. China Clean Energy | Dow Jones vs. Fast Retailing Co |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
Other Complementary Tools
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world |