Correlation Between DOW and Stadion Trilogy

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

Diversification Opportunities for DOW and Stadion Trilogy

0.3
  Correlation Coefficient

Weak diversification

The 3 months correlation between DOW and Stadion is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding DOW and Stadion Trilogy Alternative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stadion Trilogy Alte 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 Stadion Trilogy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stadion Trilogy Alte has no effect on the direction of DOW i.e., DOW and Stadion Trilogy go up and down completely randomly.
    Optimize

Pair Corralation between DOW and Stadion Trilogy

Given the investment horizon of 90 days DOW is expected to generate 2.96 times more return on investment than Stadion Trilogy. However, DOW is 2.96 times more volatile than Stadion Trilogy Alternative. It trades about 0.02 of its potential returns per unit of risk. Stadion Trilogy Alternative is currently generating about -0.04 per unit of risk. If you would invest  3,109,797  in DOW on August 31, 2022 and sell it today you would earn a total of  275,149  from holding DOW or generate 8.85% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy99.79%
ValuesDaily Returns

DOW  vs.  Stadion Trilogy Alternative

 Performance (%) 
       Timeline  

DOW and Stadion Trilogy 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.

Stadion Trilogy Alternative

Pair trading matchups for Stadion Trilogy

Pair Trading with DOW and Stadion Trilogy

The main advantage of trading using opposite DOW and Stadion Trilogy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DOW position performs unexpectedly, Stadion Trilogy 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 Stadion Trilogy will offset losses from the drop in Stadion Trilogy'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 Stadion Trilogy Alternative 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.
Stadion Trilogy vs. Jpmorgan Hedged Equity
Stadion Trilogy vs. Gateway Fund Class
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 Watchlist Optimization module to optimize watchlists to build efficient portfolio or rebalance existing positions based on mean-variance optimization algorithm.

Other Complementary Tools

Watchlist Optimization
Optimize watchlists to build efficient portfolio or rebalance existing positions based on mean-variance optimization algorithm
Go
Insider Screener
Find insiders across different sectors to evaluate their impact on performance
Go
Stock Tickers
Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites
Go
Options Analysis
Analyze and evaluate options and option chains as a potential hedge for your portfolios
Go
Options Analysis
Analyze and evaluate options and option chains as a potential hedge for your portfolios
Go
Aroon Oscillator
Analyze current equity momentum using Aroon Oscillator and other momentum ratios
Go