Correlation Between DOW and Federated Mdt

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

Diversification Opportunities for DOW and Federated Mdt

0.96
  Correlation Coefficient

Almost no diversification

The 3 months correlation between DOW and Federated is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding DOW and Federated Mdt Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Mdt Large 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 Federated Mdt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Mdt Large has no effect on the direction of DOW i.e., DOW and Federated Mdt go up and down completely randomly.
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Pair Corralation between DOW and Federated Mdt

Given the investment horizon of 90 days DOW is expected to generate 0.43 times more return on investment than Federated Mdt. However, DOW is 2.35 times less risky than Federated Mdt. It trades about -0.04 of its potential returns per unit of risk. Federated Mdt Large is currently generating about -0.02 per unit of risk. If you would invest  3,487,016  in DOW on April 5, 2022 and sell it today you would lose (377,290)  from holding DOW or give up 10.82% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

DOW  vs.  Federated Mdt Large

 Performance (%) 
      Timeline 

DOW and Federated Mdt Volatility Contrast

 Predicted Return Density 
      Returns 

DOW

Pair trading matchups for DOW

Context Therapeutics vs. DOW
Vmware vs. DOW
Cyclacel Pharmaceuti vs. DOW
Arca Biopharma vs. DOW
Solo Brands vs. DOW
MITIE GROUP vs. DOW
RENEWI PLC vs. DOW
Seneca Foods vs. DOW
International Business vs. DOW
Novan vs. DOW
Alphabet 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.

Federated Mdt Large

Pair trading matchups for Federated Mdt

Sentinelone Inc vs. Federated Mdt
Seneca Foods vs. Federated Mdt
Vmware vs. Federated Mdt
GLAXOSMITHKLINE PLC vs. Federated Mdt
ATT vs. Federated Mdt
Novan vs. Federated Mdt
International Business vs. Federated Mdt
BP PLC vs. Federated Mdt
RENEWI PLC vs. Federated Mdt
Liquidia Corp vs. Federated Mdt
Arca Biopharma vs. Federated Mdt
MITIE GROUP vs. Federated Mdt
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 Federated Mdt 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. Federated Mdt'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, Federated Mdt'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 Federated Mdt Large.

Pair Trading with DOW and Federated Mdt

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

DOW

Pair trading matchups for DOW

Liquidia Corp vs. DOW
Sentinelone Inc vs. DOW
Novan vs. DOW
RENEWI PLC vs. DOW
Visa vs. DOW
Vmware vs. DOW
Seneca Foods vs. DOW
ATT vs. DOW
Cyclacel Pharmaceuti vs. DOW
Alphabet vs. DOW
Arca Biopharma 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 Federated Mdt Large 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.

Federated Mdt Large

Pair trading matchups for Federated Mdt

Alphabet vs. Federated Mdt
RENEWI PLC vs. Federated Mdt
BP PLC vs. Federated Mdt
Liquidia Corp vs. Federated Mdt
International Business vs. Federated Mdt
Alzamend Neuro vs. Federated Mdt
ATT vs. Federated Mdt
Visa vs. Federated Mdt
Novan vs. Federated Mdt
Calyxt vs. Federated Mdt
Context Therapeutics vs. Federated Mdt
Solo Brands vs. Federated Mdt
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 Federated Mdt 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. Federated Mdt'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, Federated Mdt'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 Federated Mdt Large.
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.

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