Correlation Between DOW and Badger DAO

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both DOW and Badger DAO 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 Badger DAO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DOW and Badger DAO, you can compare the effects of market volatilities on DOW and Badger DAO 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 Badger DAO. Check out your portfolio center. Please also check ongoing floating volatility patterns of DOW and Badger DAO.

Diversification Opportunities for DOW and Badger DAO

0.61
  Correlation Coefficient

Poor diversification

The 3 months correlation between DOW and Badger is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding DOW and Badger DAO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Badger DAO 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 are associated (or correlated) with Badger DAO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Badger DAO has no effect on the direction of DOW i.e., DOW and Badger DAO go up and down completely randomly.
    Optimize

Pair Corralation between DOW and Badger DAO

Given the investment horizon of 90 days DOW is expected to under-perform the Badger DAO. But the index apears to be less risky and, when comparing its historical volatility, DOW is 4.7 times less risky than Badger DAO. The index trades about -0.36 of its potential returns per unit of risk. The Badger DAO is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  369.00  in Badger DAO on June 28, 2022 and sell it today you would earn a total of  38.00  from holding Badger DAO or generate 10.3% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy70.0%
ValuesDaily Returns

DOW  vs.  Badger DAO

 Performance (%) 
       Timeline  

DOW and Badger DAO Volatility Contrast

   Predicted Return Density   
       Returns  

DOW

Pair trading matchups for 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 DOW and Badger DAO

The main advantage of trading using opposite DOW and Badger DAO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DOW position performs unexpectedly, Badger DAO 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 Badger DAO will offset losses from the drop in Badger DAO's long position.
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.
The idea behind DOW and Badger DAO 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.
Badger DAO vs. XRP
Badger DAO vs. Solana
Badger DAO vs. Polkadot
Badger DAO vs. Chainlink
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.

Other Complementary Tools

Sync Your Broker
Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors.
Go
Bollinger Bands
Use Bollinger Bands indicator to analyze target price for a given investing horizon
Go
Equity Analysis
Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities
Go
Portfolio Comparator
Compare the composition, asset allocations and performance of any two portfolios in your account
Go
Insider Screener
Find insiders across different sectors to evaluate their impact on performance
Go
Premium Stories
Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope
Go
Pattern Recognition
Use different Pattern Recognition models to time the market across multiple global exchanges
Go
Portfolio Center
All portfolio management and optimization tools to improve performance of your portfolios
Go