Correlation Between Aave and DOW

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

Specify exactly 2 symbols:

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

Diversification Opportunities for Aave and DOW

0.49
  Correlation Coefficient
Aave
DOW

Very weak diversification

The 3 months correlation between Aave and DOW is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Aave and DOW in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on DOW and Aave 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 Aave are associated (or correlated) with DOW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DOW has no effect on the direction of Aave i.e., Aave and DOW go up and down completely randomly.
    Optimize

Pair Corralation between Aave and DOW

Assuming the 90 days trading horizon Aave is expected to generate 25.91 times more return on investment than DOW. However, Aave is 25.91 times more volatile than DOW. It trades about 0.06 of its potential returns per unit of risk. DOW is currently generating about 0.04 per unit of risk. If you would invest  0.00  in Aave on July 29, 2021 and sell it today you would earn a total of  33,001  from holding Aave or generate 9.223372036854776E16% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy97.27%
ValuesDaily Returns

Aave  vs.  DOW

 Performance (%) 
      Timeline 

Aave and DOW Volatility Contrast

 Predicted Return Density 
      Returns 

DOW

Pair trading matchups for DOW

Oracle vs. DOW
Tiger Oil vs. DOW
Originclear vs. DOW
Ckx Lands vs. DOW
Ginkgo Bioworks vs. DOW
Tata Motors vs. DOW
Facebook vs. DOW
Vmware vs. DOW
ConocoPhillips vs. DOW
Salesforce vs. DOW
GM vs. DOW
Sentinelone Inc 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 Aave and DOW

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

Pair trading matchups for DOW

Tata Motors vs. DOW
Pentair vs. DOW
Sentinelone Inc vs. DOW
Merchants Bancorp vs. DOW
Originclear vs. DOW
Vmware vs. DOW
Ckx Lands vs. DOW
ConocoPhillips vs. DOW
Home Depot vs. DOW
GM vs. DOW
Middlefield Banc vs. DOW
Alphabet 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.
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..

Other Complementary Tools

Global Correlations
Find global opportunities by holding instruments from different markets
Go
ETF Directory
Find actively traded Exchange Traded Funds (ETF) from around the world
Go
Idea Optimizer
Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio
Go
Portfolio Rebalancing
Analyze risk-adjusted returns against different time horizons to find asset-allocation targets
Go
Equity Analysis
Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities
Go
Insider Screener
Find insiders across different sectors to evaluate their impact on performance
Go
CEO Directory
Screen CEOs from public companies around the world
Go
Fundamental Analysis
View fundamental data based on most recent published financial statements
Go
Analyst Recommendations
Analyst recommendations and target price estimates broken down by several categories
Go
Focused Opportunities
Build portfolios using our predefined set of ideas and optimize them against your investing preferences
Go
Bollinger Bands
Use Bollinger Bands indicator to analyze target price for a given investing horizon
Go
Headlines Timeline
Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity
Go