Correlation Between IShares Core and Dow Jones
Can any of the company-specific risk be diversified away by investing in both IShares Core 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 Core 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 Core Canadian and Dow Jones Industrial, you can compare the effects of market volatilities on IShares Core 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 Core with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and Dow Jones.
Diversification Opportunities for IShares Core and Dow Jones
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IShares and Dow is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core Canadian 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 Core 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 Core Canadian 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 Core i.e., IShares Core and Dow Jones go up and down completely randomly.
Pair Corralation between IShares Core and Dow Jones
Assuming the 90 days trading horizon iShares Core Canadian is expected to under-perform the Dow Jones. But the etf apears to be less risky and, when comparing its historical volatility, iShares Core Canadian is 3.04 times less risky than Dow Jones. The etf trades about -0.03 of its potential returns per unit of risk. The Dow Jones Industrial is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 4,231,300 in Dow Jones Industrial on August 28, 2024 and sell it today you would earn a total of 242,357 from holding Dow Jones Industrial or generate 5.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 97.62% |
| Values | Daily Returns |
iShares Core Canadian vs. Dow Jones Industrial
Performance |
| Timeline |
IShares Core and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
iShares Core Canadian
Pair trading matchups for IShares Core
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with IShares Core and Dow Jones
The main advantage of trading using opposite IShares Core and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core 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 Core vs. Franklin Global Aggregate | IShares Core vs. Franklin Large Cap | IShares Core vs. First Trust Senior | IShares Core vs. BMO Aggregate Bond |
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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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