Correlation Between Xtrackers Russell and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Xtrackers Russell 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 Xtrackers Russell and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xtrackers Russell 2000 and Dow Jones Industrial, you can compare the effects of market volatilities on Xtrackers Russell 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 Xtrackers Russell with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers Russell and Dow Jones.
Diversification Opportunities for Xtrackers Russell and Dow Jones
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Xtrackers and Dow is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers Russell 2000 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 Xtrackers Russell 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 Xtrackers Russell 2000 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 Xtrackers Russell i.e., Xtrackers Russell and Dow Jones go up and down completely randomly.
Pair Corralation between Xtrackers Russell and Dow Jones
Assuming the 90 days trading horizon Xtrackers Russell 2000 is expected to generate 3.75 times more return on investment than Dow Jones. However, Xtrackers Russell is 3.75 times more volatile than Dow Jones Industrial. It trades about 0.21 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.37 per unit of risk. If you would invest 27,165 in Xtrackers Russell 2000 on September 5, 2024 and sell it today you would earn a total of 4,390 from holding Xtrackers Russell 2000 or generate 16.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Xtrackers Russell 2000 vs. Dow Jones Industrial
Performance |
| Timeline |
Xtrackers Russell and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Xtrackers Russell 2000
Pair trading matchups for Xtrackers Russell
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Xtrackers Russell and Dow Jones
The main advantage of trading using opposite Xtrackers Russell and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers Russell 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.| Xtrackers Russell vs. Xtrackers MSCI USA | Xtrackers Russell vs. Xtrackers USD Corporate | Xtrackers Russell vs. Xtrackers MSCI AC | Xtrackers Russell vs. Xtrackers MSCI World |
| Dow Jones vs. Shake Shack | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. Dave Busters Entertainment | Dow Jones vs. Meli Hotels International |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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