# Correlation Between Vertex Energy and DOW

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

## Diversification Opportunities for Vertex Energy and DOW

0.8 | Correlation Coefficient |

### Very poor diversification

The 3 months correlation between Vertex and DOW is

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

Given the investment horizon of 90 days Vertex Energy is expected to generate 4.44 times more return on investment than DOW. However, Vertex Energy is 4.44 times more volatile than DOW. It trades about 0.07 of its potential returns per unit of risk. DOW is currently generating about 0.27 per unit of risk. If you would invest

**823.00**in Vertex Energy on**August 28, 2022**and sell it today you would**earn a total of 47.00**from holding Vertex Energy or generate**5.71%**return on investment over**90**days.Time Period | 3 Months [change] |

Direction | Moves Together |

Strength | Strong |

Accuracy | 95.45% |

Values | Daily Returns |

## Vertex Energy vs. DOW

Performance (%) |

Timeline |

## Vertex Energy and DOW Volatility Contrast

Predicted Return Density |

Returns |

## Vertex Energy

### Pair trading matchups for Vertex Energy

## DOW

### Pair trading matchups for DOW

Invst Grade vs. DOW | ||

SPDR Portfolio vs. DOW | ||

PBF Energy vs. DOW | ||

FTSE All-World vs. DOW | ||

Short-Term Bond vs. DOW | ||

Russell 2500 vs. DOW | ||

High Yield vs. DOW | ||

Diamond Offshore vs. DOW | ||

Total Stock 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 Vertex Energy and DOW

The main advantage of trading using opposite Vertex Energy and DOW positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vertex Energy 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.Vertex Energy vs. Marathon Petroleum Corp | ||

Vertex Energy vs. MEDIVOLVE INC | ||

Vertex Energy vs. Valero Energy Corp |

FTSE All-World vs. DOW | ||

Total Stock vs. DOW | ||

SPDR Portfolio vs. DOW | ||

Short-Term Bond vs. DOW | ||

Invst Grade vs. DOW | ||

Russell 2500 vs. DOW | ||

High Yield vs. DOW | ||

Tidewater vs. DOW | ||

PBF Energy 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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