Correlation Between DOW and Annovis Bio

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

Diversification Opportunities for DOW and Annovis Bio

0.75
  Correlation Coefficient

Poor diversification

The 3 months correlation between DOW and Annovis is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding DOW and Annovis Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Annovis Bio 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 Annovis Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Annovis Bio has no effect on the direction of DOW i.e., DOW and Annovis Bio go up and down completely randomly.
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Pair Corralation between DOW and Annovis Bio

Given the investment horizon of 90 days DOW is expected to under-perform the Annovis Bio. But the index apears to be less risky and, when comparing its historical volatility, DOW is 11.17 times less risky than Annovis Bio. The index trades about -0.02 of its potential returns per unit of risk. The Annovis Bio is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  3,076  in Annovis Bio on February 19, 2022 and sell it today you would lose (2,161)  from holding Annovis Bio or give up 70.25% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

DOW  vs.  Annovis Bio

 Performance (%) 
      Timeline 

DOW and Annovis Bio Volatility Contrast

 Predicted Return Density 
      Returns 

DOW

Pair trading matchups for DOW

Nxp Semiconductors vs. DOW
Microsoft Corp vs. DOW
Ford vs. DOW
Citigroup vs. DOW
Apple vs. DOW
Vmware vs. DOW
International Business vs. DOW
Fidelity Info vs. DOW
Salesforce vs. DOW
Applied Materials vs. DOW
Accenture Plc 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.

Annovis Bio

Pair trading matchups for Annovis Bio

Pair Trading with DOW and Annovis Bio

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

DOW

Pair trading matchups for DOW

Ford vs. DOW
Dupont Denemours vs. DOW
Global X vs. DOW
Apple vs. DOW
Microsoft Corp vs. DOW
Citigroup vs. DOW
Veeco Instrument vs. DOW
Fidelity Info vs. DOW
Nxp Semiconductors vs. DOW
Palo Alto vs. DOW
Vmware vs. DOW
International Business 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 Annovis Bio 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.

Annovis Bio

Pair trading matchups for Annovis Bio

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

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