Correlation Between Dow and Chemtrade Logistics

Can any of the company-specific risk be diversified away by investing in both Dow and Chemtrade Logistics 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 Dow and Chemtrade Logistics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dow Inc and Chemtrade Logistics Income, you can compare the effects of market volatilities on Dow and Chemtrade Logistics 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 Dow with a short position of Chemtrade Logistics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow and Chemtrade Logistics.

Diversification Opportunities for Dow and Chemtrade Logistics

-0.05

Correlation Coefficient

Dow  Chemtrade Logistics

Good diversification

The 3 months correlation between Dow and Chemtrade is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Dow Inc and Chemtrade Logistics Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chemtrade Logistics and Dow 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 Dow Inc are associated (or correlated) with Chemtrade Logistics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chemtrade Logistics has no effect on the direction of Dow i.e., Dow and Chemtrade Logistics go up and down completely randomly.

Pair Corralation between Dow and Chemtrade Logistics

Considering the 90-day investment horizon Dow Inc is expected to under-perform the Chemtrade Logistics. But the stock apears to be less risky and, when comparing its historical volatility, Dow Inc is 1.09 times less risky than Chemtrade Logistics. The stock trades about -0.29 of its potential returns per unit of risk. The Chemtrade Logistics Income is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  767.00  in Chemtrade Logistics Income on September 22, 2024 and sell it today you would lose (17.00) from holding Chemtrade Logistics Income or give up 2.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Dow Inc  vs.  Chemtrade Logistics Income

Dow Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dow Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Chemtrade Logistics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chemtrade Logistics Income has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Chemtrade Logistics is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Dow and Chemtrade Logistics

The main advantage of trading using opposite Dow and Chemtrade Logistics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow position performs unexpectedly, Chemtrade Logistics 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 Chemtrade Logistics will offset losses from the drop in Chemtrade Logistics' long position.

The idea behind Dow Inc and Chemtrade Logistics Income 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.

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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 the Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.