Correlation Between Dow and Univar

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

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

Diversification Opportunities for Dow and Univar

-0.65

Correlation Coefficient

Dow  Univar

Excellent diversification

The 3 months correlation between Dow and Univar is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Dow Inc and Univar Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Univar Inc 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 Univar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Univar Inc has no effect on the direction of Dow i.e., Dow and Univar go up and down completely randomly.

Pair Corralation between Dow and Univar

Considering the 90-day investment horizon Dow Inc is not expected to generate positive returns. However, Dow Inc is 1.11 times less risky than Univar. It waists most of its returns potential to compensate for thr risk taken. Univar is generating about 0.05 per unit of risk. If you would invest  3,274  in Univar Inc on August 31, 2024 and sell it today you would earn a total of  319.00  from holding Univar Inc or generate 9.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	30.91%
Values	Daily Returns

Dow Inc  vs.  Univar Inc

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.

Univar Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Univar Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Univar is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Dow and Univar

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

The idea behind Dow Inc and Univar Inc 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.