Correlation Between DOW and ASM INTERNATIONAL

By analyzing existing cross correlation between DOW and ASM INTERNATIONAL NV, you can compare the effects of market volatilities on DOW and ASM INTERNATIONAL 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 with a short position of ASM INTERNATIONAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of DOW and ASM INTERNATIONAL.

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

Diversification Opportunities for DOW and ASM INTERNATIONAL

0.68
  Correlation Coefficient
DOW
ASM INTERNATIONAL

Poor diversification

The 3 months correlation between DOW and ASMIY is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding DOW and ASM INTERNATIONAL NV in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on ASM INTERNATIONAL and DOW 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 are associated (or correlated) with ASM INTERNATIONAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASM INTERNATIONAL has no effect on the direction of DOW i.e., DOW and ASM INTERNATIONAL go up and down completely randomly.
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Pair Corralation between DOW and ASM INTERNATIONAL

Given the investment horizon of 90 days DOW is expected to generate 6.88 times less return on investment than ASM INTERNATIONAL. But when comparing it to its historical volatility, DOW is 2.03 times less risky than ASM INTERNATIONAL. It trades about 0.04 of its potential returns per unit of risk. ASM INTERNATIONAL NV is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  10,644  in ASM INTERNATIONAL NV on September 10, 2021 and sell it today you would earn a total of  33,030  from holding ASM INTERNATIONAL NV or generate 310.32% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy75.34%
ValuesDaily Returns

DOW  vs.  ASM INTERNATIONAL NV

 Performance (%) 
      Timeline 

DOW and ASM INTERNATIONAL Volatility Contrast

 Predicted Return Density 
      Returns 

DOW

Pair trading matchups for DOW

Meta Platforms vs. DOW
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Alphabet vs. DOW
Russell 2000 vs. DOW
Apple vs. DOW
Qualcomm vs. DOW
GM vs. DOW
Short Russell vs. DOW
Vanguard 500 vs. DOW
Ford vs. DOW
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Visa vs. DOW
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against DOW as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. DOW's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, DOW's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to DOW.

Pair Trading with DOW and ASM INTERNATIONAL

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

DOW

Pair trading matchups for DOW

UAE Ishares vs. DOW
Short Russell vs. DOW
Vanguard Specialized vs. DOW
Ford vs. DOW
Gladstone Land vs. DOW
Vanguard Mid-Cap vs. DOW
Vanguard 500 vs. DOW
Russell 2000 vs. DOW
Apple vs. DOW
Twitter vs. DOW
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against DOW as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. DOW's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, DOW's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to DOW.
The idea behind DOW and ASM INTERNATIONAL NV 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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