Correlation Between DOW and Atmos Energy

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

Diversification Opportunities for DOW and Atmos Energy

0.83
  Correlation Coefficient

Very poor diversification

The 3 months correlation between DOW and Atmos is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding DOW and Atmos Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atmos Energy Corp 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 Atmos Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atmos Energy Corp has no effect on the direction of DOW i.e., DOW and Atmos Energy go up and down completely randomly.
    Optimize

Pair Corralation between DOW and Atmos Energy

Given the investment horizon of 90 days DOW is expected to generate 0.78 times more return on investment than Atmos Energy. However, DOW is 1.29 times less risky than Atmos Energy. It trades about 0.24 of its potential returns per unit of risk. Atmos Energy Corp is currently generating about 0.18 per unit of risk. If you would invest  3,036,483  in DOW on May 15, 2022 and sell it today you would earn a total of  339,622  from holding DOW or generate 11.18% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

DOW  vs.  Atmos Energy Corp

 Performance (%) 
       Timeline  

DOW and Atmos Energy Volatility Contrast

   Predicted Return Density   
       Returns  

DOW

Pair trading matchups for DOW

Universal Health vs. DOW
Semiconductor Bear vs. DOW
Olema Pharmaceuticals vs. DOW
Rolls Royce vs. DOW
Ark Innovation vs. DOW
Horizon Therapeutics vs. DOW
Prog Hldgs vs. DOW
Cto Realty 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 Atmos Energy

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

DOW

Pair trading matchups for DOW

Prog Hldgs vs. DOW
Nike vs. DOW
Cto Realty vs. DOW
Olema Pharmaceuticals vs. DOW
Semiconductor Bear vs. DOW
Horizon Therapeutics vs. DOW
Ark Innovation vs. DOW
Essential Properties 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 Atmos Energy Corp 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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
Crypto Correlations
Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins
Go
Portfolio Volatility
Check portfolio volatility and analyze historical return density to properly model market risk
Go
Analyst Recommendations
Analyst recommendations and target price estimates broken down by several categories
Go
Theme Ratings
Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance
Go
Fund Screener
Find actively-traded funds from around the world traded on over 30 global exchanges
Go
Focused Opportunities
Build portfolios using our predefined set of ideas and optimize them against your investing preferences
Go
Idea Breakdown
Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes
Go
Volatility Analysis
Get historical volatility and risk analysis based on latest market data
Go
Portfolio File Import
Quickly import all of your third-party portfolios from your local drive in csv format
Go
Global Correlations
Find global opportunities by holding instruments from different markets
Go
Balance Of Power
Check stock momentum by analyzing Balance Of Power indicator and other technical ratios
Go