Correlation Between MONITRONICS INTERNATIONAL and DOW

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

Diversification Opportunities for MONITRONICS INTERNATIONAL and DOW

0.77
  Correlation Coefficient

Poor diversification

The 3 months correlation between MONITRONICS and DOW is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding MONITRONICS INTERNATIONAL and DOW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DOW and MONITRONICS INTERNATIONAL 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 MONITRONICS INTERNATIONAL 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 MONITRONICS INTERNATIONAL i.e., MONITRONICS INTERNATIONAL and DOW go up and down completely randomly.
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Pair Corralation between MONITRONICS INTERNATIONAL and DOW

Given the investment horizon of 90 days MONITRONICS INTERNATIONAL is expected to generate 13.53 times more return on investment than DOW. However, MONITRONICS INTERNATIONAL is 13.53 times more volatile than DOW. It trades about 0.01 of its potential returns per unit of risk. DOW is currently generating about -0.04 per unit of risk. If you would invest  882.00  in MONITRONICS INTERNATIONAL on April 7, 2022 and sell it today you would lose (832.00)  from holding MONITRONICS INTERNATIONAL or give up 94.33% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy99.6%
ValuesDaily Returns

MONITRONICS INTERNATIONAL  vs.  DOW

 Performance (%) 
      Timeline 

MONITRONICS INTERNATIONAL and DOW Volatility Contrast

 Predicted Return Density 
      Returns 

DOW

Pair trading matchups for DOW

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Penn Natl vs. DOW
United Fire vs. DOW
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Greenlight Cap vs. DOW
Occidental Petroleum vs. DOW
Alpha Metallurgical vs. DOW
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Ollies Bargain 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 MONITRONICS INTERNATIONAL and DOW

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

Ollies Bargain vs. DOW
Purecycle Technologies vs. DOW
Halliburton vs. DOW
Interactive Brokers vs. DOW
Albemarle Corp vs. DOW
Mandiant vs. DOW
Twitter vs. DOW
Erie Indemnity vs. DOW
Eastgroup Properties vs. DOW
Ezcorp vs. DOW
ATT vs. DOW
United Fire 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 Probability Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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