Correlation Between 054536AA5 and DOW

By analyzing existing cross correlation between AXA SA 86 and DOW, you can compare the effects of market volatilities on 054536AA5 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 054536AA5 with a short position of DOW. Check out your portfolio center. Please also check ongoing floating volatility patterns of 054536AA5 and DOW.

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Can any of the company-specific risk be diversified away by investing in both 054536AA5 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 054536AA5 and DOW into the same portfolio, which is an essential part of the fundamental portfolio management process.

Diversification Opportunities for 054536AA5 and DOW

-0.7
  Correlation Coefficient
AXA SA 86
DOW

Excellent diversification

The 3 months correlation between 054536AA5 and DOW is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding AXA SA 8.6% 15Dec2030 and DOW in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on DOW and 054536AA5 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 AXA SA 86 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 054536AA5 i.e., 054536AA5 and DOW go up and down completely randomly.
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Pair Corralation between 054536AA5 and DOW

Assuming the 90 days trading horizon 054536AA5 is expected to generate 8.82 times less return on investment than DOW. But when comparing it to its historical volatility, AXA SA 86 is 1.17 times less risky than DOW. It trades about 0.01 of its potential returns per unit of risk. DOW is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,387,589  in DOW on August 30, 2021 and sell it today you would earn a total of  1,102,345  from holding DOW or generate 46.17% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy85.82%
ValuesDaily Returns

AXA SA 8.6% 15Dec2030  vs.  DOW

 Performance (%) 
      Timeline 

054536AA5 and DOW Volatility Contrast

 Predicted Return Density 
      Returns 

DOW

Pair trading matchups for DOW

Arweave vs. DOW
Du Pont vs. DOW
Enovix Corp vs. DOW
Microsoft Corp vs. DOW
Bitcoin vs. DOW
BriaCell Therapeutics vs. DOW
Smart Bitcoin vs. DOW
Bitcoin SV vs. DOW
GM vs. DOW
Expensify Inc vs. DOW
Bitcoin Cash 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 054536AA5 and DOW

The main advantage of trading using opposite 054536AA5 and DOW positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 054536AA5 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 AXA SA 86 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
Salesforce vs. DOW
Calumet Specialty vs. DOW
Enovix Corp vs. DOW
Expensify Inc vs. DOW
Bitcoin Cash vs. DOW
Tesla vs. DOW
Smart Bitcoin vs. DOW
GM vs. DOW
Ford vs. DOW
Du Pont vs. DOW
Arcbest Corp 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 Shere Portfolio module to track or share privately all of your investments from the convenience of any device.

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