Correlation Between DOW and TuanChe

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

Diversification Opportunities for DOW and TuanChe

0.13
  Correlation Coefficient

Average diversification

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

Given the investment horizon of 90 days DOW is expected to generate 0.24 times more return on investment than TuanChe. However, DOW is 4.13 times less risky than TuanChe. It trades about -0.1 of its potential returns per unit of risk. TuanChe Limited is currently generating about -0.03 per unit of risk. If you would invest  3,263,719  in DOW on March 27, 2022 and sell it today you would lose (113,651)  from holding DOW or give up 3.48% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

DOW  vs.  TuanChe Limited

 Performance (%) 
      Timeline 

DOW and TuanChe Volatility Contrast

 Predicted Return Density 
      Returns 

DOW

Pair trading matchups for DOW

Concrete Pumping vs. DOW
Stealthgas vs. DOW
Ally Financial vs. DOW
SP 500 vs. DOW
Coinbase Global vs. DOW
Microchip Technology vs. DOW
Li-Cycle Holdings vs. DOW
SP 500 vs. DOW
Kar Auction vs. DOW
Envirotech Vehicles vs. DOW
Upstart Holdings 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.

TuanChe Limited

Pair trading matchups for TuanChe

Pair Trading with DOW and TuanChe

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

DOW

Pair trading matchups for DOW

Vaneck Oil vs. DOW
DB Commodity vs. DOW
Coinbase Global vs. DOW
Stealthgas vs. DOW
CalAmp Corp vs. DOW
Genie Energy vs. DOW
Weyco Gp vs. DOW
SP 500 vs. DOW
SP 500 vs. DOW
Microchip Technology vs. DOW
Concrete Pumping 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 TuanChe Limited 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.

TuanChe Limited

Pair trading matchups for TuanChe

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 ETF Directory module to find actively traded Exchange Traded Funds (ETF) from around the world.

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