Correlation Between IShares SPTSX and Dow Jones
Can any of the company-specific risk be diversified away by investing in both IShares SPTSX 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 SPTSX 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 SPTSX Capped and Dow Jones Industrial, you can compare the effects of market volatilities on IShares SPTSX 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 SPTSX with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SPTSX and Dow Jones.
Diversification Opportunities for IShares SPTSX and Dow Jones
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and Dow is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding iShares SPTSX Capped 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 SPTSX 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 SPTSX Capped 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 SPTSX i.e., IShares SPTSX and Dow Jones go up and down completely randomly.
Pair Corralation between IShares SPTSX and Dow Jones
Assuming the 90 days trading horizon IShares SPTSX is expected to generate 3.17 times less return on investment than Dow Jones. In addition to that, IShares SPTSX is 1.47 times more volatile than Dow Jones Industrial. It trades about 0.02 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.12 per unit of volatility. If you would invest 3,383,361 in Dow Jones Industrial on August 31, 2024 and sell it today you would earn a total of 1,107,704 from holding Dow Jones Industrial or generate 32.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.73% |
| Values | Daily Returns |
iShares SPTSX Capped vs. Dow Jones Industrial
Performance |
| Timeline |
IShares SPTSX and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
iShares SPTSX Capped
Pair trading matchups for IShares SPTSX
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with IShares SPTSX and Dow Jones
The main advantage of trading using opposite IShares SPTSX and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SPTSX 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 SPTSX vs. iShares SPTSX Capped | IShares SPTSX vs. iShares Global Healthcare | IShares SPTSX vs. BMO Equal Weight | IShares SPTSX vs. iShares SPTSX Capped |
| Dow Jones vs. Aerofoam Metals | Dow Jones vs. ACG Metals Limited | Dow Jones vs. China Clean Energy | Dow Jones vs. Fast Retailing Co |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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