Correlation Between Arweave and DOW

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

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

Diversification Opportunities for Arweave and DOW

0.27
  Correlation Coefficient
Arweave
DOW

Modest diversification

The 3 months correlation between Arweave and DOW is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Arweave and DOW in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on DOW and Arweave 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 Arweave 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 Arweave i.e., Arweave and DOW go up and down completely randomly.
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Pair Corralation between Arweave and DOW

Assuming the 90 days horizon Arweave is expected to generate 5.63 times more return on investment than DOW. However, Arweave is 5.63 times more volatile than DOW. It trades about 0.03 of its potential returns per unit of risk. DOW is currently generating about 0.04 per unit of risk. If you would invest  5,337  in Arweave on October 18, 2021 and sell it today you would lose (360.00)  from holding Arweave or give up 6.75% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy12.77%
ValuesDaily Returns

Arweave  vs.  DOW

 Performance (%) 
      Timeline 

Arweave and DOW Volatility Contrast

 Predicted Return Density 
      Returns 

DOW

Pair trading matchups for DOW

Dodge Cox vs. DOW
Wanchain vs. DOW
Waves vs. DOW
Anchor Protocol vs. DOW
Vipshop Holdings vs. DOW
Stafi vs. DOW
Vanguard Institutional vs. DOW
Ontology vs. DOW
Phantasma vs. DOW
Hive vs. DOW
OMG Network 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 Arweave and DOW

The main advantage of trading using opposite Arweave and DOW positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arweave 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 Arweave 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

Vanguard Institutional vs. DOW
Coca Cola vs. DOW
Wanchain vs. DOW
Valvoline vs. DOW
Vipshop Holdings vs. DOW
Harmony vs. DOW
Kava vs. DOW
Waves vs. DOW
OMG Network vs. DOW
Beazer Homes vs. DOW
Anchor Protocol vs. DOW
Dodge Cox 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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