Correlation Between Alger Weatherbie and DOW

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

Diversification Opportunities for Alger Weatherbie and DOW

0.9
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Alger and DOW is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Alger Weatherbie Enduring and DOW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DOW and Alger Weatherbie 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 Alger Weatherbie Enduring 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 Alger Weatherbie i.e., Alger Weatherbie and DOW go up and down completely randomly.
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Pair Corralation between Alger Weatherbie and DOW

Assuming the 90 days horizon Alger Weatherbie Enduring is expected to generate 1.67 times more return on investment than DOW. However, Alger Weatherbie is 1.67 times more volatile than DOW. It trades about 0.35 of its potential returns per unit of risk. DOW is currently generating about 0.3 per unit of risk. If you would invest  636.00  in Alger Weatherbie Enduring on May 17, 2022 and sell it today you would earn a total of  167.00  from holding Alger Weatherbie Enduring or generate 26.26% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Alger Weatherbie Enduring  vs.  DOW

 Performance (%) 
       Timeline  

Alger Weatherbie and DOW Volatility Contrast

   Predicted Return Density   
       Returns  

Alger Weatherbie Enduring

Pair trading matchups for Alger Weatherbie

Visa vs. Alger Weatherbie
Tenneco Automotive vs. Alger Weatherbie
Salesforce vs. Alger Weatherbie
United Rentals vs. Alger Weatherbie
Vmware vs. Alger Weatherbie
Sentinelone Inc vs. Alger Weatherbie
Walker Dunlop vs. Alger Weatherbie
Qualcomm vs. Alger Weatherbie
Skyworks Solutions vs. Alger Weatherbie
Wex vs. Alger Weatherbie
Amazon vs. Alger Weatherbie
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 Alger Weatherbie 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. Alger Weatherbie'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, Alger Weatherbie'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 Alger Weatherbie Enduring.

DOW

Pair trading matchups for DOW

Boeing vs. DOW
Wex vs. DOW
Amazon vs. DOW
Skyworks Solutions vs. DOW
Vmware vs. DOW
Ford vs. DOW
Visa vs. DOW
Aspen Technology vs. DOW
United Rentals vs. DOW
Graphic Packaging vs. DOW
Oracle 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 Alger Weatherbie and DOW

The main advantage of trading using opposite Alger Weatherbie and DOW positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alger Weatherbie 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.

Alger Weatherbie Enduring

Pair trading matchups for Alger Weatherbie

United Rentals vs. Alger Weatherbie
Visa vs. Alger Weatherbie
Sentinelone Inc vs. Alger Weatherbie
Salesforce vs. Alger Weatherbie
Boeing vs. Alger Weatherbie
Skyworks Solutions vs. Alger Weatherbie
Oracle vs. Alger Weatherbie
Ford vs. Alger Weatherbie
Tenneco Automotive vs. Alger Weatherbie
Dupont Denemours vs. Alger Weatherbie
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 Alger Weatherbie 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. Alger Weatherbie'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, Alger Weatherbie'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 Alger Weatherbie Enduring.
The idea behind Alger Weatherbie Enduring 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

Walker Dunlop vs. DOW
Boeing vs. DOW
Sentinelone Inc vs. DOW
Graphic Packaging vs. DOW
Tenneco Automotive vs. DOW
Aspen Technology vs. DOW
Ford vs. DOW
Vmware vs. DOW
Dupont Denemours vs. DOW
Equinix vs. DOW
United Rentals 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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