Correlation Between DOW and Greensky Inc

By analyzing existing cross correlation between DOW and Greensky Inc Cl, you can compare the effects of market volatilities on DOW and Greensky Inc 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 Greensky Inc. Check out your portfolio center. Please also check ongoing floating volatility patterns of DOW and Greensky Inc.

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Can any of the company-specific risk be diversified away by investing in both DOW and Greensky Inc 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 Greensky Inc into the same portfolio, which is an essential part of the fundamental portfolio management process.

Diversification Opportunities for DOW and Greensky Inc

0.37
  Correlation Coefficient
DOW
Greensky Inc Cl

Weak diversification

The 3 months correlation between DOW and Greensky is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding DOW and Greensky Inc Cl in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Greensky Inc Cl 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 Greensky Inc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Greensky Inc Cl has no effect on the direction of DOW i.e., DOW and Greensky Inc go up and down completely randomly.
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Pair Corralation between DOW and Greensky Inc

Given the investment horizon of 90 days DOW is expected to generate 0.51 times more return on investment than Greensky Inc. However, DOW is 1.98 times less risky than Greensky Inc. It trades about 0.03 of its potential returns per unit of risk. Greensky Inc Cl is currently generating about 0.0 per unit of risk. If you would invest  3,560,198  in DOW on October 20, 2021 and sell it today you would earn a total of  30,983  from holding DOW or generate 0.87% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

DOW  vs.  Greensky Inc Cl

 Performance (%) 
      Timeline 

DOW and Greensky Inc Volatility Contrast

 Predicted Return Density 
      Returns 

DOW

Pair trading matchups for DOW

Fidelity Total vs. DOW
FTSE EM vs. DOW
Fidelity Total vs. DOW
Microsoft Corp vs. DOW
Total Intl vs. DOW
Total Stock vs. DOW
Boston Omaha vs. DOW
Citigroup vs. DOW
Fidelity 500 vs. DOW
Visa vs. DOW
FTSE All-World 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 Greensky Inc

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

DOW

Pair trading matchups for DOW

Advantage Solutions vs. DOW
Microsoft Corp vs. DOW
FTSE All-World vs. DOW
Alphabet vs. DOW
Boston Omaha vs. DOW
FTSE EM vs. DOW
Total Stock vs. DOW
GM vs. DOW
Fidelity Total vs. DOW
Fidelity Total vs. DOW
Citigroup 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 Greensky Inc Cl 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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