Correlation Between DOW and MONITRONICS INTERNATIONAL

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

Diversification Opportunities for DOW and MONITRONICS INTERNATIONAL

-0.13
  Correlation Coefficient

Good diversification

The 3 months correlation between DOW and MONITRONICS is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding DOW and MONITRONICS INTERNATIONAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MONITRONICS INTERNATIONAL 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 MONITRONICS INTERNATIONAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MONITRONICS INTERNATIONAL has no effect on the direction of DOW i.e., DOW and MONITRONICS INTERNATIONAL go up and down completely randomly.
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Pair Corralation between DOW and MONITRONICS INTERNATIONAL

Given the investment horizon of 90 days DOW is expected to generate 1.09 times more return on investment than MONITRONICS INTERNATIONAL. However, DOW is 1.09 times more volatile than MONITRONICS INTERNATIONAL. It trades about 0.24 of its potential returns per unit of risk. MONITRONICS INTERNATIONAL is currently generating about -0.22 per unit of risk. If you would invest  3,117,384  in DOW on May 11, 2022 and sell it today you would earn a total of  160,057  from holding DOW or generate 5.13% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy95.45%
ValuesDaily Returns

DOW  vs.  MONITRONICS INTERNATIONAL

 Performance (%) 
       Timeline  

DOW and MONITRONICS INTERNATIONAL Volatility Contrast

   Predicted Return Density   
       Returns  

DOW

Pair trading matchups for DOW

Tesla vs. DOW
Microsoft Corp vs. DOW
Fidelity Select vs. DOW
Coca Cola vs. DOW
Shopify vs. DOW
Exxon vs. DOW
Enbridge vs. DOW
Agnico-Eagle Mines vs. DOW
Otp Bank vs. DOW
Ultralife Corp vs. DOW
Salesforce vs. DOW
Hyliion Hldg 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.

MONITRONICS INTERNATIONAL

Pair trading matchups for MONITRONICS INTERNATIONAL

Canadian National vs. MONITRONICS INTERNATIONAL
Amazon vs. MONITRONICS INTERNATIONAL
Salesforce vs. MONITRONICS INTERNATIONAL
Alphabet vs. MONITRONICS INTERNATIONAL
Shopify vs. MONITRONICS INTERNATIONAL
Blink Charging vs. MONITRONICS INTERNATIONAL
Ubiquiti Networks vs. MONITRONICS INTERNATIONAL
Microsoft Corp vs. MONITRONICS INTERNATIONAL
Fidelity Select vs. MONITRONICS INTERNATIONAL
Hyliion Hldg vs. MONITRONICS INTERNATIONAL
Agnico-Eagle Mines vs. MONITRONICS INTERNATIONAL
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 MONITRONICS INTERNATIONAL 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. MONITRONICS INTERNATIONAL'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, MONITRONICS INTERNATIONAL'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 MONITRONICS INTERNATIONAL.

Pair Trading with DOW and MONITRONICS INTERNATIONAL

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

DOW

Pair trading matchups for DOW

Coca Cola vs. DOW
Tesla vs. DOW
Alphabet vs. DOW
Fidelity Select vs. DOW
Microsoft Corp vs. DOW
Otp Bank vs. DOW
Ubiquiti Networks vs. DOW
Canadian National vs. DOW
Ultralife Corp vs. DOW
Tencent Holdings vs. DOW
Blink Charging 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 MONITRONICS INTERNATIONAL 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.

MONITRONICS INTERNATIONAL

Pair trading matchups for MONITRONICS INTERNATIONAL

Shopify vs. MONITRONICS INTERNATIONAL
Salesforce vs. MONITRONICS INTERNATIONAL
Tencent Holdings vs. MONITRONICS INTERNATIONAL
Amazon vs. MONITRONICS INTERNATIONAL
Microsoft Corp vs. MONITRONICS INTERNATIONAL
Coca Cola vs. MONITRONICS INTERNATIONAL
Otp Bank vs. MONITRONICS INTERNATIONAL
Ubiquiti Networks vs. MONITRONICS INTERNATIONAL
Hyliion Hldg vs. MONITRONICS INTERNATIONAL
Alphabet vs. MONITRONICS INTERNATIONAL
Canadian National vs. MONITRONICS INTERNATIONAL
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 MONITRONICS INTERNATIONAL 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. MONITRONICS INTERNATIONAL'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, MONITRONICS INTERNATIONAL'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 MONITRONICS INTERNATIONAL.
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..

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