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 Small, 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

0.92
  Correlation Coefficient

Almost no diversification

The 3 months correlation between DOW and Federated is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding DOW and Federated Mdt Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Mdt Small 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 Small 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 0.58 times more return on investment than Federated Mdt. However, DOW is 1.74 times less risky than Federated Mdt. It trades about -0.2 of its potential returns per unit of risk. Federated Mdt Small is currently generating about -0.15 per unit of risk. If you would invest  3,291,578  in DOW on April 7, 2022 and sell it today you would lose (194,796)  from holding DOW or give up 5.92% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

DOW  vs.  Federated Mdt Small

 Performance (%) 
      Timeline 

DOW and Federated Mdt Volatility Contrast

 Predicted Return Density 
      Returns 

DOW

Pair trading matchups for DOW

Ollies Bargain vs. DOW
Eastgroup Properties vs. DOW
Mandiant vs. DOW
Occidental Petroleum vs. DOW
ATT vs. DOW
MP Materials vs. DOW
Ezcorp vs. DOW
Bancfirst Corp vs. DOW
Purecycle Technologies vs. DOW
United Fire vs. DOW
Alpha Metallurgical vs. DOW
Penn Natl 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 Small

Pair trading matchups for Federated Mdt

Twitter vs. Federated Mdt
Greenlight Cap vs. Federated Mdt
Eastgroup Properties vs. Federated Mdt
Ollies Bargain vs. Federated Mdt
Interactive Brokers vs. Federated Mdt
Halliburton vs. Federated Mdt
United Fire vs. Federated Mdt
Ezcorp vs. Federated Mdt
Penn Natl vs. Federated Mdt
Purecycle Technologies vs. Federated Mdt
Occidental Petroleum vs. Federated Mdt
MP Materials 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 Small.

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

Halliburton vs. DOW
MP Materials vs. DOW
Eastgroup Properties vs. DOW
Interactive Brokers vs. DOW
Greenlight Cap vs. DOW
Ollies Bargain vs. DOW
Bancfirst Corp vs. DOW
Occidental Petroleum vs. DOW
Alpha Metallurgical vs. DOW
Albemarle Corp vs. DOW
Ezcorp vs. DOW
Mandiant 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 Small 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 Small

Pair trading matchups for Federated Mdt

Interactive Brokers vs. Federated Mdt
Ollies Bargain vs. Federated Mdt
Occidental Petroleum vs. Federated Mdt
MP Materials vs. Federated Mdt
Bancfirst Corp vs. Federated Mdt
Ezcorp vs. Federated Mdt
Twitter vs. Federated Mdt
Alpha Metallurgical vs. Federated Mdt
Penn Natl vs. Federated Mdt
Halliburton vs. Federated Mdt
Erie Indemnity vs. Federated Mdt
ATT 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 Small.
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.

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