Correlation Between DOW and Ankr Network

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

Diversification Opportunities for DOW and Ankr Network

0.62
  Correlation Coefficient

Poor diversification

The 3 months correlation between DOW and Ankr Network is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding DOW and Ankr Network in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ankr Network 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 Ankr Network. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ankr Network has no effect on the direction of DOW i.e., DOW and Ankr Network go up and down completely randomly.
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Pair Corralation between DOW and Ankr Network

Given the investment horizon of 90 days DOW is expected to generate 0.12 times more return on investment than Ankr Network. However, DOW is 8.33 times less risky than Ankr Network. It trades about 0.05 of its potential returns per unit of risk. Ankr Network is currently generating about 0.0 per unit of risk. If you would invest  2,714,770  in DOW on May 14, 2022 and sell it today you would earn a total of  630,873  from holding DOW or generate 23.24% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy44.35%
ValuesDaily Returns

DOW  vs.  Ankr Network

 Performance (%) 
       Timeline  

DOW and Ankr Network Volatility Contrast

   Predicted Return Density   
       Returns  

DOW

Pair trading matchups for DOW

Citigroup vs. DOW
GM vs. DOW
Visa vs. DOW
Vmware vs. DOW
Grayscale Ethereum vs. DOW
Alphabet vs. DOW
Stmicroelectronics vs. DOW
Twitter 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 DOW and Ankr Network

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

DOW

Pair trading matchups for DOW

GM vs. DOW
Citigroup vs. DOW
Ford vs. DOW
Alphabet vs. DOW
Visa vs. DOW
Twitter vs. DOW
Vmware 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.
The idea behind DOW and Ankr Network 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.
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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