Correlation Between Constellium and Dow

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

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

Diversification Opportunities for Constellium and Dow

-0.37

Correlation Coefficient

Constellium  Dow

Very good diversification

The 3 months correlation between Constellium and Dow is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Constellium Nv and Dow Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Inc and Constellium 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 Constellium Nv 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 Inc has no effect on the direction of Constellium i.e., Constellium and Dow go up and down completely randomly.

Pair Corralation between Constellium and Dow

Given the investment horizon of 90 days Constellium Nv is expected to generate 1.65 times more return on investment than Dow. However, Constellium is 1.65 times more volatile than Dow Inc. It trades about 0.06 of its potential returns per unit of risk. Dow Inc is currently generating about -0.07 per unit of risk. If you would invest  997.00  in Constellium Nv on December 29, 2024 and sell it today you would earn a total of  90.00  from holding Constellium Nv or generate 9.03% return on investment over 90 days.

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

Constellium Nv  vs.  Dow Inc

Constellium Nv

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Constellium Nv are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Constellium may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Dow Inc

Risk-Adjusted Performance

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 latest unfluctuating performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Constellium and Dow

The main advantage of trading using opposite Constellium and Dow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Constellium 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.

The idea behind Constellium Nv and Dow 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.

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 the Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.