Correlation Between Horizon Therapeutics and DOW

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

Diversification Opportunities for Horizon Therapeutics and DOW

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Horizon and DOW is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Horizon Therapeutics and DOW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DOW and Horizon Therapeutics 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 Horizon Therapeutics 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 Horizon Therapeutics i.e., Horizon Therapeutics and DOW go up and down completely randomly.
    Optimize

Pair Corralation between Horizon Therapeutics and DOW

Given the investment horizon of 90 days Horizon Therapeutics is expected to under-perform the DOW. In addition to that, Horizon Therapeutics is 2.08 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  3,526,467  in DOW on July 6, 2022 and sell it today you would lose (501,404)  from holding DOW or give up 14.22% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Horizon Therapeutics  vs.  DOW

 Performance (%) 
       Timeline  

Horizon Therapeutics and DOW Volatility Contrast

   Predicted Return Density   
       Returns  

Horizon Therapeutics

Pair trading matchups for Horizon Therapeutics

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.

Pair Trading with Horizon Therapeutics and DOW

The main advantage of trading using opposite Horizon Therapeutics and DOW positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Horizon Therapeutics 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.
Horizon Therapeutics vs. Amazon Inc
The idea behind Horizon Therapeutics 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.
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.

Other Complementary Tools

CEO Directory
Screen CEOs from public companies around the world
Go
Portfolio Diagnostics
Use generated alerts and portfolio events aggregator to diagnose current holdings
Go
Commodity Channel Index
Use Commodity Channel Index to analyze current equity momentum
Go
Companies Directory
Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals
Go
My Watchlist Analysis
Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like
Go
Stock Screener
Find equities using custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook.
Go