Correlation Between FlexShares IBoxx and Dow Jones
Can any of the company-specific risk be diversified away by investing in both FlexShares IBoxx 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 FlexShares IBoxx and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FlexShares iBoxx 5 Year and Dow Jones Industrial, you can compare the effects of market volatilities on FlexShares IBoxx 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 FlexShares IBoxx with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of FlexShares IBoxx and Dow Jones.
Diversification Opportunities for FlexShares IBoxx and Dow Jones
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between FlexShares and Dow is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares iBoxx 5 Year 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 FlexShares IBoxx 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 FlexShares iBoxx 5 Year 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 FlexShares IBoxx i.e., FlexShares IBoxx and Dow Jones go up and down completely randomly.
Pair Corralation between FlexShares IBoxx and Dow Jones
Given the investment horizon of 90 days FlexShares iBoxx 5 Year is expected to under-perform the Dow Jones. But the etf apears to be less risky and, when comparing its historical volatility, FlexShares iBoxx 5 Year is 4.96 times less risky than Dow Jones. The etf trades about -0.15 of its potential returns per unit of risk. The Dow Jones Industrial is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 4,251,495 in Dow Jones Industrial on August 24, 2024 and sell it today you would earn a total of 135,540 from holding Dow Jones Industrial or generate 3.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
FlexShares iBoxx 5 Year vs. Dow Jones Industrial
Performance |
| Timeline |
FlexShares IBoxx and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
FlexShares iBoxx 5 Year
Pair trading matchups for FlexShares IBoxx
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with FlexShares IBoxx and Dow Jones
The main advantage of trading using opposite FlexShares IBoxx and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FlexShares IBoxx 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.| FlexShares IBoxx vs. Schwab Intermediate Term Treasury | FlexShares IBoxx vs. Schwab Aggregate Bond | FlexShares IBoxx vs. Schwab International Equity | FlexShares IBoxx vs. Schwab Emerging Markets |
| Dow Jones vs. Barrick Gold Corp | Dow Jones vs. Jutal Offshore Oil | Dow Jones vs. Eastern Co | Dow Jones vs. Weyco Group |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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