Correlation Between Vanguard Developed and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Vanguard Developed 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 Developed 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 Developed Markets and Dow Jones Industrial, you can compare the effects of market volatilities on Vanguard Developed 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 Developed with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Developed and Dow Jones.
Diversification Opportunities for Vanguard Developed and Dow Jones
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Dow is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Developed Markets 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 Developed 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 Developed Markets 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 Developed i.e., Vanguard Developed and Dow Jones go up and down completely randomly.
Pair Corralation between Vanguard Developed and Dow Jones
Assuming the 90 days horizon Vanguard Developed Markets is expected to generate 1.23 times more return on investment than Dow Jones. However, Vanguard Developed is 1.23 times more volatile than Dow Jones Industrial. It trades about 0.22 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about -0.25 per unit of risk. If you would invest 1,605 in Vanguard Developed Markets on November 29, 2024 and sell it today you would earn a total of 57.00 from holding Vanguard Developed Markets or generate 3.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Developed Markets vs. Dow Jones Industrial
Performance |
| Timeline |
Vanguard Developed and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Vanguard Developed Markets
Pair trading matchups for Vanguard Developed
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Vanguard Developed and Dow Jones
The main advantage of trading using opposite Vanguard Developed and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Developed 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 Developed vs. Vanguard Emerging Markets | Vanguard Developed vs. Vanguard Small Cap Index | Vanguard Developed vs. Vanguard Total Bond | Vanguard Developed vs. Vanguard Mid Cap Index |
| Dow Jones vs. Starbucks | Dow Jones vs. Westinghouse Air Brake | Dow Jones vs. Finnair Oyj | Dow Jones vs. Mesa Air 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
Other Complementary Tools
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets |