Correlation Between Dow Jones and Candel Therapeutics

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

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

Diversification Opportunities for Dow Jones and Candel Therapeutics

-0.09

Correlation Coefficient

Dow Jones  Candel Therapeutics

Good diversification

The 3 months correlation between Dow and Candel is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Candel Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Candel Therapeutics and Dow Jones 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 Jones Industrial are associated (or correlated) with Candel Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Candel Therapeutics has no effect on the direction of Dow Jones i.e., Dow Jones and Candel Therapeutics go up and down completely randomly.

Pair Corralation between Dow Jones and Candel Therapeutics

Assuming the 90 days trading horizon Dow Jones Industrial is expected to under-perform the Candel Therapeutics. But the index apears to be less risky and, when comparing its historical volatility, Dow Jones Industrial is 7.39 times less risky than Candel Therapeutics. The index trades about -0.03 of its potential returns per unit of risk. The Candel Therapeutics is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  917.00  in Candel Therapeutics on December 26, 2024 and sell it today you would lose (95.00) from holding Candel Therapeutics or give up 10.36% of portfolio value over 90 days.

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

Dow Jones Industrial  vs.  Candel Therapeutics

Pair Trading with Dow Jones and Candel Therapeutics

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

The idea behind Dow Jones Industrial and Candel Therapeutics 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.