Correlation Between DOW and Par Technology

By analyzing existing cross correlation between DOW and Par Technology Corp, you can compare the effects of market volatilities on DOW and Par Technology 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 Par Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of DOW and Par Technology.

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

Diversification Opportunities for DOW and Par Technology

-0.2
  Correlation Coefficient
DOW
Par Technology Corp

Good diversification

The 3 months correlation between DOW and Par Technology is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding DOW and Par Technology Corp in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Par Technology Corp 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 Par Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Par Technology Corp has no effect on the direction of DOW i.e., DOW and Par Technology go up and down completely randomly.
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Pair Corralation between DOW and Par Technology

Given the investment horizon of 90 days DOW is expected to under-perform the Par Technology. But the index apears to be less risky and, when comparing its historical volatility, DOW is 9.01 times less risky than Par Technology. The index trades about -0.33 of its potential returns per unit of risk. The Par Technology Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  6,124  in Par Technology Corp on June 23, 2021 and sell it today you would earn a total of  64.00  from holding Par Technology Corp or generate 1.05% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

DOW  vs.  Par Technology Corp

 Performance (%) 
      Timeline 

DOW and Par Technology Volatility Contrast

 Predicted Return Density 
      Returns 

DOW

Pair trading matchups for DOW

Internet Computer vs. DOW
Ethereum vs. DOW
Aave vs. DOW
Bitcoin vs. DOW
Ocean Protocol vs. DOW
Brazilian Digital vs. DOW
MATH 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 Par Technology

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

DOW

Pair trading matchups for DOW

MATH vs. DOW
Internet Computer vs. DOW
TRON vs. DOW
Aave vs. DOW
Brazilian Digital vs. DOW
Ethereum 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 Par Technology Corp 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..

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