Correlation Between Dow and Lsb Industries

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

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

Diversification Opportunities for Dow and Lsb Industries

-0.2

Correlation Coefficient

Dow  Lsb Industries

Good diversification

The 3 months correlation between Dow and Lsb is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Dow Inc and Lsb Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lsb Industries 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 Lsb Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lsb Industries has no effect on the direction of Dow i.e., Dow and Lsb Industries go up and down completely randomly.

Pair Corralation between Dow and Lsb Industries

Considering the 90-day investment horizon Dow Inc is not expected to generate positive returns. However, Dow Inc is 2.1 times less risky than Lsb Industries. It waists most of its returns potential to compensate for thr risk taken. Lsb Industries is generating about -0.02 per unit of risk. If you would invest  4,668  in Dow Inc on August 31, 2024 and sell it today you would lose (204.00) from holding Dow Inc or give up 4.37% of portfolio value over 90 days.

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

Dow Inc  vs.  Lsb Industries

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 December 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Lsb Industries

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lsb Industries are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Lsb Industries unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dow and Lsb Industries

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

The idea behind Dow Inc and Lsb Industries 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.