Correlation Between DOW and Braintrust

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

Diversification Opportunities for DOW and Braintrust

-0.45
  Correlation Coefficient

Very good diversification

The 3 months correlation between DOW and Braintrust is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding DOW and Braintrust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Braintrust 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 Braintrust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Braintrust has no effect on the direction of DOW i.e., DOW and Braintrust go up and down completely randomly.
    Optimize

Pair Corralation between DOW and Braintrust

Given the investment horizon of 90 days DOW is expected to under-perform the Braintrust. But the index apears to be less risky and, when comparing its historical volatility, DOW is 3.26 times less risky than Braintrust. The index trades about -0.19 of its potential returns per unit of risk. The Braintrust is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  188.00  in Braintrust on July 5, 2022 and sell it today you would earn a total of  31.00  from holding Braintrust or generate 16.49% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

DOW  vs.  Braintrust

 Performance (%) 
       Timeline  

DOW and Braintrust 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 Braintrust

The main advantage of trading using opposite DOW and Braintrust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DOW position performs unexpectedly, Braintrust 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 Braintrust will offset losses from the drop in Braintrust'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 Braintrust 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.
Braintrust vs. XRP
Braintrust vs. Solana
Braintrust vs. Polkadot
Braintrust 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.

Other Complementary Tools

Instant Ratings
Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance
Go
Volatility Analysis
Get historical volatility and risk analysis based on latest market data
Go
Focused Opportunities
Build portfolios using our predefined set of ideas and optimize them against your investing preferences
Go
Portfolio Volatility
Check portfolio volatility and analyze historical return density to properly model market risk
Go
Portfolio Optimization
Compute new portfolio that will generate highest expected return given your specified tolerance for risk
Go
Probability Of Bankruptcy
Get analysis of equity chance of financial distress in the next 2 years
Go
Cryptocurrency Center
Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency
Go
Fundamentals Comparison
Compare fundamentals across multiple equities to find investing opportunities
Go
Correlation Analysis
Reduce portfolio risk simply by holding instruments which are not perfectly correlated
Go