Correlation Between Cytokinetics and DOW

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

Diversification Opportunities for Cytokinetics and DOW

0.32
  Correlation Coefficient

Weak diversification

The 3 months correlation between Cytokinetics and DOW is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Cytokinetics and DOW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DOW and Cytokinetics 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 Cytokinetics 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 Cytokinetics i.e., Cytokinetics and DOW go up and down completely randomly.
    Optimize

Pair Corralation between Cytokinetics and DOW

Given the investment horizon of 90 days Cytokinetics is expected to generate 4.7 times more return on investment than DOW. However, Cytokinetics is 4.7 times more volatile than DOW. It trades about 0.34 of its potential returns per unit of risk. DOW is currently generating about 0.5 per unit of risk. If you would invest  3,854  in Cytokinetics on May 19, 2022 and sell it today you would earn a total of  1,227  from holding Cytokinetics or generate 31.84% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy95.65%
ValuesDaily Returns

Cytokinetics  vs.  DOW

 Performance (%) 
       Timeline  

Cytokinetics and DOW Volatility Contrast

   Predicted Return Density   
       Returns  

Cytokinetics

Pair trading matchups for Cytokinetics

DOW

Pair trading matchups for DOW

Otp Bank vs. DOW
Sentinelone Inc vs. DOW
Salesforce vs. DOW
ConocoPhillips vs. DOW
Main Street vs. DOW
Nio Inc vs. DOW
Goldman Sachs vs. DOW
Alphabet vs. DOW
Invesco Solar vs. DOW
Johnson Johnson vs. DOW
Bristol-Myers Squibb vs. DOW
Dupont Denemours 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 Cytokinetics and DOW

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

Cytokinetics

Pair trading matchups for Cytokinetics

The idea behind Cytokinetics 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

Devon Energy vs. DOW
Johnson Johnson vs. DOW
Salesforce vs. DOW
Bristol-Myers Squibb vs. DOW
Invesco Solar vs. DOW
Stryker Corp vs. DOW
Sentinelone Inc vs. DOW
Lam Research vs. DOW
T Rowe vs. DOW
B of A vs. DOW
ConocoPhillips 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

Other Complementary Tools

Fundamental Analysis
View fundamental data based on most recent published financial statements
Go
Bond Directory
Find actively traded corporate debentures issued by US companies
Go
Equity Search
Search for actively traded equities including funds and ETFs from over 30 global markets
Go
Portfolio Diagnostics
Use generated alerts and portfolio events aggregator to diagnose current holdings
Go
Stock Screener
Find equities using custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook.
Go
Portfolio Backtesting
Avoid under-diversification and over-optimization by backtesting your portfolios
Go
Headlines Timeline
Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity
Go