Correlation Between Dow Jones and Intercept Pharmaceuticals

Can any of the company-specific risk be diversified away by investing in both Dow Jones and Intercept Pharmaceuticals 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 Intercept Pharmaceuticals 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 Intercept Pharmaceuticals, you can compare the effects of market volatilities on Dow Jones and Intercept Pharmaceuticals 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 Intercept Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Intercept Pharmaceuticals.

Diversification Opportunities for Dow Jones and Intercept Pharmaceuticals

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Correlation Coefficient

Dow Jones  Intercept Pharmaceuticals

Pay attention - limited upside

The 3 months correlation between Dow and Intercept is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Intercept Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intercept Pharmaceuticals 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 Intercept Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intercept Pharmaceuticals has no effect on the direction of Dow Jones i.e., Dow Jones and Intercept Pharmaceuticals go up and down completely randomly.

Pair Corralation between Dow Jones and Intercept Pharmaceuticals

If you would invest (100.00) in Intercept Pharmaceuticals on December 30, 2024 and sell it today you would earn a total of  100.00  from holding Intercept Pharmaceuticals or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Dow Jones Industrial  vs.  Intercept Pharmaceuticals

Pair Trading with Dow Jones and Intercept Pharmaceuticals

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

The idea behind Dow Jones Industrial and Intercept Pharmaceuticals 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.