Correlation Between DOW and Puhui Wealth

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

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

Diversification Opportunities for DOW and Puhui Wealth

-0.32
  Correlation Coefficient
DOW
Puhui Wealth Investment

Very good diversification

The 3 months correlation between DOW and Puhui is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding DOW and Puhui Wealth Investment in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Puhui Wealth Investment 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 Puhui Wealth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Puhui Wealth Investment has no effect on the direction of DOW i.e., DOW and Puhui Wealth go up and down completely randomly.
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Pair Corralation between DOW and Puhui Wealth

Given the investment horizon of 90 days DOW is expected to generate 0.13 times more return on investment than Puhui Wealth. However, DOW is 7.85 times less risky than Puhui Wealth. It trades about -0.15 of its potential returns per unit of risk. Puhui Wealth Investment is currently generating about -0.19 per unit of risk. If you would invest  3,512,008  in DOW on June 21, 2021 and sell it today you would lose (53,520)  from holding DOW or give up 1.52% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

DOW  vs.  Puhui Wealth Investment

 Performance (%) 
      Timeline 

DOW and Puhui Wealth Volatility Contrast

 Predicted Return Density 
      Returns 

DOW

Pair trading matchups for DOW

Ethereum vs. DOW
Aave vs. DOW
TRON vs. DOW
Ocean Protocol 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 Puhui Wealth

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

DOW

Pair trading matchups for DOW

Ocean Protocol vs. DOW
Ethereum vs. DOW
Internet Computer vs. DOW
Chain Guardians vs. DOW
Aave vs. DOW
TRON 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 Puhui Wealth Investment 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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