Correlation Between Vanguard FTSE and DOW JONES

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Vanguard FTSE 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 Vanguard FTSE and DOW JONES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard FTSE All-World and DOW JONES INDUSTRIAL, you can compare the effects of market volatilities on Vanguard FTSE 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 Vanguard FTSE with a short position of DOW JONES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and DOW JONES.

Diversification Opportunities for Vanguard FTSE and DOW JONES

  Correlation Coefficient

Poor diversification

The 3 months correlation between Vanguard and DOW JONES is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE All-World 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 Vanguard FTSE 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 Vanguard FTSE All-World 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 Vanguard FTSE i.e., Vanguard FTSE and DOW JONES go up and down completely randomly.

Pair Corralation between Vanguard FTSE and DOW JONES

Considering the 90-day investment horizon Vanguard FTSE All-World is expected to under-perform the DOW JONES. In addition to that, Vanguard FTSE is 1.07 times more volatile than DOW JONES INDUSTRIAL. It trades about -0.01 of its total potential returns per unit of risk. DOW JONES INDUSTRIAL is currently generating about 0.0 per unit of volatility. If you would invest  3,540,524  in DOW JONES INDUSTRIAL on October 29, 2022 and sell it today you would lose (110,263)  from holding DOW JONES INDUSTRIAL or give up 3.11% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
ValuesDaily Returns

Vanguard FTSE All-World  vs.  DOW JONES INDUSTRIAL

 Performance (%) 

Vanguard FTSE and DOW JONES Volatility Contrast

   Predicted Return Density   

Pair Trading with Vanguard FTSE and DOW JONES

The main advantage of trading using opposite Vanguard FTSE and DOW JONES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE 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's long position.
Vanguard FTSE vs. Vanguard FTSE All-World
Vanguard FTSE vs. ZEGA Buy And
Vanguard FTSE vs. Hartford Total Return
Vanguard FTSE vs. Zillow Group
The idea behind Vanguard FTSE All-World and DOW JONES INDUSTRIAL 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.
DOW JONES vs. Koninklijke DSM NV
DOW JONES vs. Gerdau SA
DOW JONES vs. Ryanair Holdings PLC
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.

Other Complementary Tools

Pair Correlation
Compare performance and examine fundamental relationship between any two equity instruments
Idea Analyzer
Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas
Stock Tickers
Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites
Portfolio Volatility
Check portfolio volatility and analyze historical return density to properly model market risk
Technical Analysis
Check basic technical indicators and analysis based on most latest market data