Correlation Between Dow and NanoXplore

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

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

Diversification Opportunities for Dow and NanoXplore

0.29

Correlation Coefficient

Dow  NanoXplore

Modest diversification

The 3 months correlation between Dow and NanoXplore is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Dow Inc and NanoXplore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NanoXplore 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 NanoXplore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NanoXplore has no effect on the direction of Dow i.e., Dow and NanoXplore go up and down completely randomly.

Pair Corralation between Dow and NanoXplore

Considering the 90-day investment horizon Dow Inc is expected to under-perform the NanoXplore. But the stock apears to be less risky and, when comparing its historical volatility, Dow Inc is 1.06 times less risky than NanoXplore. The stock trades about -0.07 of its potential returns per unit of risk. The NanoXplore is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  169.00  in NanoXplore on December 29, 2024 and sell it today you would lose (5.00) from holding NanoXplore or give up 2.96% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Dow Inc  vs.  NanoXplore

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.

NanoXplore

Risk-Adjusted Performance

Very Weak

Over the last 90 days NanoXplore has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, NanoXplore is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Dow and NanoXplore

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

The idea behind Dow Inc and NanoXplore 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.