Correlation Between LINGYI ITECH and DOW

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

Diversification Opportunities for LINGYI ITECH and DOW

0.6
  Correlation Coefficient

Poor diversification

The 3 months correlation between LINGYI and DOW is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding LINGYI ITECH GUAN and DOW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DOW and LINGYI ITECH 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 LINGYI ITECH GUAN are associated (or correlated) with DOW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DOW has no effect on the direction of LINGYI ITECH i.e., LINGYI ITECH and DOW go up and down completely randomly.
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Pair Corralation between LINGYI ITECH and DOW

Assuming the 90 days trading horizon LINGYI ITECH GUAN is expected to under-perform the DOW. In addition to that, LINGYI ITECH is 3.0 times more volatile than DOW. It trades about -0.06 of its total potential returns per unit of risk. DOW is currently generating about 0.04 per unit of volatility. If you would invest  2,664,259  in DOW on April 5, 2022 and sell it today you would earn a total of  445,467  from holding DOW or generate 16.72% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy77.71%
ValuesDaily Returns

LINGYI ITECH GUAN  vs.  DOW

 Performance (%) 
      Timeline 

LINGYI ITECH and DOW Volatility Contrast

 Predicted Return Density 
      Returns 

LINGYI ITECH GUAN

Pair trading matchups for LINGYI ITECH

Cyclacel Pharmaceuti vs. LINGYI ITECH
Seneca Foods vs. LINGYI ITECH
International Business vs. LINGYI ITECH
Vmware vs. LINGYI ITECH
Sentinelone Inc vs. LINGYI ITECH
Visa vs. LINGYI ITECH
Calyxt vs. LINGYI ITECH
Arca Biopharma vs. LINGYI ITECH
ATT vs. LINGYI ITECH
Solo Brands vs. LINGYI ITECH
BP PLC vs. LINGYI ITECH
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 LINGYI ITECH 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. LINGYI ITECH'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, LINGYI ITECH'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 LINGYI ITECH GUAN.

DOW

Pair trading matchups for DOW

Cyclacel Pharmaceuti vs. DOW
Alphabet vs. DOW
Novan vs. DOW
Sentinelone Inc vs. DOW
GLAXOSMITHKLINE PLC vs. DOW
Liquidia Corp vs. DOW
Arca Biopharma vs. DOW
Visa vs. DOW
International Business vs. DOW
MITIE GROUP vs. DOW
Calyxt vs. DOW
Vmware 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.

Pair Trading with LINGYI ITECH and DOW

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

LINGYI ITECH GUAN

Pair trading matchups for LINGYI ITECH

Seneca Foods vs. LINGYI ITECH
Liquidia Corp vs. LINGYI ITECH
Sentinelone Inc vs. LINGYI ITECH
Vmware vs. LINGYI ITECH
Alphabet vs. LINGYI ITECH
Calyxt vs. LINGYI ITECH
Visa vs. LINGYI ITECH
ATT vs. LINGYI ITECH
Cyclacel Pharmaceuti vs. LINGYI ITECH
Arca Biopharma vs. LINGYI ITECH
Novan vs. LINGYI ITECH
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 LINGYI ITECH 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. LINGYI ITECH'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, LINGYI ITECH'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 LINGYI ITECH GUAN.
The idea behind LINGYI ITECH GUAN and DOW 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.

DOW

Pair trading matchups for DOW

Visa vs. DOW
MITIE GROUP vs. DOW
Liquidia Corp vs. DOW
GLAXOSMITHKLINE PLC vs. DOW
Vmware vs. DOW
Arca Biopharma vs. DOW
Sentinelone Inc vs. DOW
Context Therapeutics vs. DOW
Novan vs. DOW
Cyclacel Pharmaceuti vs. DOW
ATT 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.
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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