Correlation Between Dow and Dupont De

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

By analyzing existing cross correlation between Dow Inc and Dupont De Nemours, you can compare the effects of market volatilities on Dow and Dupont De 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 Dupont De. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow and Dupont De.

Diversification Opportunities for Dow and Dupont De

0.74

Correlation Coefficient

Dow  Dupont De

Poor diversification

The 3 months correlation between Dow and Dupont is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Dow Inc and Dupont De Nemours in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dupont De Nemours 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 Inc are associated (or correlated) with Dupont De. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dupont De Nemours has no effect on the direction of Dow i.e., Dow and Dupont De go up and down completely randomly.

Pair Corralation between Dow and Dupont De

Considering the 90-day investment horizon Dow Inc is expected to under-perform the Dupont De. But the stock apears to be less risky and, when comparing its historical volatility, Dow Inc is 1.27 times less risky than Dupont De. The stock trades about -0.13 of its potential returns per unit of risk. The Dupont De Nemours is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  7,451  in Dupont De Nemours on January 20, 2024 and sell it today you would lose (98.00) from holding Dupont De Nemours or give up 1.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Dow Inc  vs.  Dupont De Nemours

Dow Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dow Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Dow may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Dupont De Nemours

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dupont De Nemours has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Dupont De is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Dow and Dupont De

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

The idea behind Dow Inc and Dupont De Nemours 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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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 the Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.