Correlation Between Dow and I 80

Can any of the company-specific risk be diversified away by investing in both Dow and I 80 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 I 80 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dow Inc and I 80 Gold Corp, you can compare the effects of market volatilities on Dow and I 80 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 I 80. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow and I 80.

Diversification Opportunities for Dow and I 80

0.88

Correlation Coefficient

Dow  I 80

Very poor diversification

The 3 months correlation between Dow and IAUX is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Dow Inc and I 80 Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on I 80 Gold 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 I 80. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of I 80 Gold has no effect on the direction of Dow i.e., Dow and I 80 go up and down completely randomly.

Pair Corralation between Dow and I 80

Considering the 90-day investment horizon Dow Inc is expected to generate 0.15 times more return on investment than I 80. However, Dow Inc is 6.46 times less risky than I 80. It trades about -0.17 of its potential returns per unit of risk. I 80 Gold Corp is currently generating about -0.04 per unit of risk. If you would invest  4,947  in Dow Inc on September 12, 2024 and sell it today you would lose (760.00) from holding Dow Inc or give up 15.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Dow Inc  vs.  I 80 Gold Corp

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 unfluctuating 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.

I 80 Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days I 80 Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Dow and I 80

The main advantage of trading using opposite Dow and I 80 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow position performs unexpectedly, I 80 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 I 80 will offset losses from the drop in I 80's long position.

The idea behind Dow Inc and I 80 Gold Corp 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.