Correlation Between Commercial Metals and Dow
Can any of the company-specific risk be diversified away by investing in both Commercial Metals 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 Commercial Metals and Dow into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commercial Metals and Dow Inc, you can compare the effects of market volatilities on Commercial Metals 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 Commercial Metals with a short position of Dow. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commercial Metals and Dow.
Diversification Opportunities for Commercial Metals and Dow
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Commercial and Dow is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Commercial Metals and Dow Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Inc and Commercial Metals 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 Commercial Metals 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 Commercial Metals i.e., Commercial Metals and Dow go up and down completely randomly.
Pair Corralation between Commercial Metals and Dow
Considering the 90-day investment horizon Commercial Metals is expected to generate 2.27 times more return on investment than Dow. However, Commercial Metals is 2.27 times more volatile than Dow Inc. It trades about 0.18 of its potential returns per unit of risk. Dow Inc is currently generating about -0.43 per unit of risk. If you would invest 5,329 in Commercial Metals on August 23, 2024 and sell it today you would earn a total of 715.00 from holding Commercial Metals or generate 13.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commercial Metals vs. Dow Inc
Performance |
| Timeline |
| Commercial Metals |
| Dow Inc |
Commercial Metals and Dow Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commercial Metals and Dow
The main advantage of trading using opposite Commercial Metals and Dow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commercial Metals 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.| Commercial Metals vs. Olympic Steel | Commercial Metals vs. Steel Dynamics | Commercial Metals vs. Nucor Corp | Commercial Metals vs. Universal Stainless Alloy |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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