Correlation Between GATX Corp and DOW

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

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

Diversification Opportunities for GATX Corp and DOW

0.37
  Correlation Coefficient
GATX Corp
DOW

Weak diversification

The 3 months correlation between GATX Corp and DOW is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding GATX Corp and DOW in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on DOW and GATX Corp 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 GATX Corp 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 GATX Corp i.e., GATX Corp and DOW go up and down completely randomly.
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Pair Corralation between GATX Corp and DOW

If you would invest (100.00)  in GATX Corp on June 30, 2021 and sell it today you would earn a total of  100.00  from holding GATX Corp or generate -100.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy0.0%
ValuesDaily Returns

GATX Corp  vs.  DOW

 Performance (%) 
      Timeline 

GATX Corp and DOW Volatility Contrast

 Predicted Return Density 
      Returns 

DOW

Pair trading matchups for DOW

Meta Materials vs. DOW
Facebook vs. DOW
Nio Inc vs. DOW
Jumia Technologies vs. DOW
Regeneron Pharmaceuticals vs. DOW
Goldman Sachs vs. DOW
Plug Power vs. DOW
Walker Dunlop vs. DOW
Apple vs. DOW
AMC Entertainment vs. DOW
Thermo Fisher vs. DOW
Ford 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 GATX Corp and DOW

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

Microsoft Corp vs. DOW
AMC Entertainment vs. DOW
Apple vs. DOW
Walker Dunlop vs. DOW
Regeneron Pharmaceuticals vs. DOW
Ford vs. DOW
Goldman Sachs vs. DOW
Nio Inc vs. DOW
Coinbase Global vs. DOW
Thermo Fisher 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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