Correlation Between Vanguard World and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Vanguard World 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 Vanguard World and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard World and Dow Jones Industrial, you can compare the effects of market volatilities on Vanguard World 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 Vanguard World with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard World and Dow Jones.
Diversification Opportunities for Vanguard World and Dow Jones
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and Dow is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard World 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 Vanguard World 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 Vanguard World 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 Vanguard World i.e., Vanguard World and Dow Jones go up and down completely randomly.
Pair Corralation between Vanguard World and Dow Jones
Assuming the 90 days trading horizon Vanguard World is expected to generate 1.93 times more return on investment than Dow Jones. However, Vanguard World is 1.93 times more volatile than Dow Jones Industrial. It trades about 0.16 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.13 per unit of risk. If you would invest 143,102 in Vanguard World on September 2, 2024 and sell it today you would earn a total of 96,898 from holding Vanguard World or generate 67.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.19% |
| Values | Daily Returns |
Vanguard World vs. Dow Jones Industrial
Performance |
| Timeline |
Vanguard World and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Vanguard World
Pair trading matchups for Vanguard World
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Vanguard World and Dow Jones
The main advantage of trading using opposite Vanguard World and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard World 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.| Vanguard World vs. Promotora y Operadora | Vanguard World vs. UnitedHealth Group Incorporated | Vanguard World vs. Qulitas Controladora SAB | Vanguard World vs. Hoteles City Express |
| Dow Jones vs. Dream Finders Homes | Dow Jones vs. GEN Restaurant Group, | Dow Jones vs. National Beverage Corp | Dow Jones vs. BJs Restaurants |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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