Correlation Between Dow Jones and WisdomTree STOXX
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By analyzing existing cross correlation between Dow Jones Industrial and WisdomTree STOXX Europe, you can compare the effects of market volatilities on Dow Jones and WisdomTree STOXX 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 Dow Jones with a short position of WisdomTree STOXX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and WisdomTree STOXX.
Diversification Opportunities for Dow Jones and WisdomTree STOXX
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dow and WisdomTree is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and WisdomTree STOXX Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree STOXX Europe and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with WisdomTree STOXX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree STOXX Europe has no effect on the direction of Dow Jones i.e., Dow Jones and WisdomTree STOXX go up and down completely randomly.
Pair Corralation between Dow Jones and WisdomTree STOXX
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.31 times more return on investment than WisdomTree STOXX. However, Dow Jones Industrial is 3.26 times less risky than WisdomTree STOXX. It trades about 0.07 of its potential returns per unit of risk. WisdomTree STOXX Europe is currently generating about 0.02 per unit of risk. If you would invest 3,314,725 in Dow Jones Industrial on September 20, 2024 and sell it today you would earn a total of 917,962 from holding Dow Jones Industrial or generate 27.69% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 97.83% |
Values | Daily Returns |
Dow Jones Industrial vs. WisdomTree STOXX Europe
Performance |
Timeline |
Dow Jones and WisdomTree STOXX Volatility Contrast
Predicted Return Density |
Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
WisdomTree STOXX Europe
Pair trading matchups for WisdomTree STOXX
Pair Trading with Dow Jones and WisdomTree STOXX
The main advantage of trading using opposite Dow Jones and WisdomTree STOXX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, WisdomTree STOXX 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 WisdomTree STOXX will offset losses from the drop in WisdomTree STOXX's long position.Dow Jones vs. Digi International | Dow Jones vs. Grupo Televisa SAB | Dow Jones vs. United Microelectronics | Dow Jones vs. Weibo Corp |
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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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