Correlation Between Dow Jones and Schroder ImmoPLUS

Can any of the company-specific risk be diversified away by investing in both Dow Jones and Schroder ImmoPLUS 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 Dow Jones and Schroder ImmoPLUS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dow Jones Industrial and Schroder ImmoPLUS, you can compare the effects of market volatilities on Dow Jones and Schroder ImmoPLUS 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 Schroder ImmoPLUS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Schroder ImmoPLUS.

Diversification Opportunities for Dow Jones and Schroder ImmoPLUS

0.4

Correlation Coefficient

Dow Jones  Schroder ImmoPLUS

Very weak diversification

The 3 months correlation between Dow and Schroder is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Schroder ImmoPLUS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schroder ImmoPLUS 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 Schroder ImmoPLUS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schroder ImmoPLUS has no effect on the direction of Dow Jones i.e., Dow Jones and Schroder ImmoPLUS go up and down completely randomly.

Pair Corralation between Dow Jones and Schroder ImmoPLUS

Assuming the 90 days trading horizon Dow Jones is expected to generate 1.23 times less return on investment than Schroder ImmoPLUS. But when comparing it to its historical volatility, Dow Jones Industrial is 1.38 times less risky than Schroder ImmoPLUS. It trades about 0.1 of its potential returns per unit of risk. Schroder ImmoPLUS is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  13,231  in Schroder ImmoPLUS on September 28, 2024 and sell it today you would earn a total of  4,119  from holding Schroder ImmoPLUS or generate 31.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Dow Jones Industrial  vs.  Schroder ImmoPLUS

Pair Trading with Dow Jones and Schroder ImmoPLUS

The main advantage of trading using opposite Dow Jones and Schroder ImmoPLUS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Schroder ImmoPLUS 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 Schroder ImmoPLUS will offset losses from the drop in Schroder ImmoPLUS's long position.

The idea behind Dow Jones Industrial and Schroder ImmoPLUS pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.