Correlation Between Dow and Hawkins
Can any of the company-specific risk be diversified away by investing in both Dow and Hawkins 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 Hawkins into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Inc and Hawkins, you can compare the effects of market volatilities on Dow and Hawkins 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 Hawkins. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow and Hawkins.
Diversification Opportunities for Dow and Hawkins
Good diversification
The 3 months correlation between Dow and Hawkins is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Dow Inc and Hawkins in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hawkins 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 Hawkins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hawkins has no effect on the direction of Dow i.e., Dow and Hawkins go up and down completely randomly.
Pair Corralation between Dow and Hawkins
Considering the 90-day investment horizon Dow Inc is expected to under-perform the Hawkins. But the stock apears to be less risky and, when comparing its historical volatility, Dow Inc is 1.92 times less risky than Hawkins. The stock trades about -0.01 of its potential returns per unit of risk. The Hawkins is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 5,035 in Hawkins on September 1, 2024 and sell it today you would earn a total of 8,416 from holding Hawkins or generate 167.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Inc vs. Hawkins
Performance |
| Timeline |
| Dow Inc |
| Hawkins |
Dow and Hawkins Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dow and Hawkins
The main advantage of trading using opposite Dow and Hawkins positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow position performs unexpectedly, Hawkins 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 Hawkins will offset losses from the drop in Hawkins' long position.The idea behind Dow Inc and Hawkins 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.| Hawkins vs. H B Fuller | Hawkins vs. Minerals Technologies | Hawkins vs. Quaker Chemical | Hawkins vs. Oil Dri |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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