Correlation Between IShares France and SPDR Dow

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

By analyzing existing cross correlation between iShares France Govt and SPDR Dow Jones, you can compare the effects of market volatilities on IShares France and SPDR Dow 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 France with a short position of SPDR Dow. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares France and SPDR Dow.

Diversification Opportunities for IShares France and SPDR Dow

0.72

Correlation Coefficient

IShares France  SPDR Dow

Poor diversification

The 3 months correlation between IShares and SPDR is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding iShares France Govt and SPDR Dow Jones in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Dow Jones and IShares France 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 France Govt are associated (or correlated) with SPDR Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Dow Jones has no effect on the direction of IShares France i.e., IShares France and SPDR Dow go up and down completely randomly.

Pair Corralation between IShares France and SPDR Dow

Assuming the 90 days trading horizon iShares France Govt is expected to generate 0.36 times more return on investment than SPDR Dow. However, iShares France Govt is 2.75 times less risky than SPDR Dow. It trades about -0.04 of its potential returns per unit of risk. SPDR Dow Jones is currently generating about -0.09 per unit of risk. If you would invest  12,797  in iShares France Govt on December 29, 2024 and sell it today you would lose (105.00) from holding iShares France Govt or give up 0.82% of portfolio value over 90 days.

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

iShares France Govt  vs.  SPDR Dow Jones

iShares France Govt

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares France Govt has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, IShares France is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

SPDR Dow Jones

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR Dow Jones has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, SPDR Dow is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares France and SPDR Dow

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

The idea behind iShares France Govt and SPDR Dow Jones 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.