Correlation Between DOW and Atreca Inc

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Can any of the company-specific risk be diversified away by investing in both DOW and Atreca Inc 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 Atreca Inc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DOW and Atreca Inc Cl, you can compare the effects of market volatilities on DOW and Atreca Inc 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 Atreca Inc. Check out your portfolio center. Please also check ongoing floating volatility patterns of DOW and Atreca Inc.

Diversification Opportunities for DOW and Atreca Inc

0.72
  Correlation Coefficient

Poor diversification

The 3 months correlation between DOW and Atreca is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding DOW and Atreca Inc Cl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atreca Inc Cl 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 Atreca Inc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atreca Inc Cl has no effect on the direction of DOW i.e., DOW and Atreca Inc go up and down completely randomly.
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Pair Corralation between DOW and Atreca Inc

Given the investment horizon of 90 days DOW is expected to under-perform the Atreca Inc. But the index apears to be less risky and, when comparing its historical volatility, DOW is 12.74 times less risky than Atreca Inc. The index trades about -0.06 of its potential returns per unit of risk. The Atreca Inc Cl is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  596.00  in Atreca Inc Cl on July 4, 2022 and sell it today you would lose (439.00)  from holding Atreca Inc Cl or give up 73.66% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

DOW  vs.  Atreca Inc Cl

 Performance (%) 
       Timeline  

DOW and Atreca Inc Volatility Contrast

   Predicted Return Density   
       Returns  

DOW

Pair trading matchups for 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 Atreca Inc

The main advantage of trading using opposite DOW and Atreca Inc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DOW position performs unexpectedly, Atreca Inc 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 Atreca Inc will offset losses from the drop in Atreca Inc's long position.
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 Atreca Inc Cl 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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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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