Correlation Between Huntsman and Dow
Can any of the company-specific risk be diversified away by investing in both Huntsman 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 Huntsman and Dow into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Huntsman and Dow Inc, you can compare the effects of market volatilities on Huntsman 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 Huntsman with a short position of Dow. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huntsman and Dow.
Diversification Opportunities for Huntsman and Dow
Very poor diversification
The 3 months correlation between Huntsman and Dow is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Huntsman and Dow Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Inc and Huntsman 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 Huntsman 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 Huntsman i.e., Huntsman and Dow go up and down completely randomly.
Pair Corralation between Huntsman and Dow
Considering the 90-day investment horizon Huntsman is expected to under-perform the Dow. In addition to that, Huntsman is 1.22 times more volatile than Dow Inc. It trades about -0.22 of its total potential returns per unit of risk. Dow Inc is currently generating about -0.23 per unit of volatility. If you would invest 5,284 in Dow Inc on August 26, 2024 and sell it today you would lose (738.00) from holding Dow Inc or give up 13.97% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Huntsman vs. Dow Inc
Performance |
| Timeline |
| Huntsman |
| Dow Inc |
Huntsman and Dow Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Huntsman and Dow
The main advantage of trading using opposite Huntsman and Dow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Huntsman 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.| Huntsman vs. Valhi Inc | Huntsman vs. Lsb Industries | Huntsman vs. Westlake Chemical Partners | Huntsman vs. Braskem SA Class |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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