Correlation Between Lsb Industries and Dow

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

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

Diversification Opportunities for Lsb Industries and Dow

-0.2

Correlation Coefficient

Lsb Industries  Dow

Good diversification

The 3 months correlation between Lsb and Dow is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Lsb Industries and Dow Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Inc and Lsb Industries 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 Lsb Industries 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 Lsb Industries i.e., Lsb Industries and Dow go up and down completely randomly.

Pair Corralation between Lsb Industries and Dow

Considering the 90-day investment horizon Lsb Industries is expected to under-perform the Dow. In addition to that, Lsb Industries is 2.14 times more volatile than Dow Inc. It trades about -0.01 of its total potential returns per unit of risk. Dow Inc is currently generating about -0.02 per unit of volatility. If you would invest  5,049  in Dow Inc on August 31, 2024 and sell it today you would lose (645.00) from holding Dow Inc or give up 12.77% of portfolio value over 90 days.

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

Lsb Industries  vs.  Dow Inc

Lsb Industries

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lsb Industries are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Lsb Industries unveiled solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Lsb Industries and Dow

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

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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.