Correlation Between AdvanSix and Dow

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

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

Diversification Opportunities for AdvanSix and Dow

0.85

Correlation Coefficient

AdvanSix  Dow

Very poor diversification

The 3 months correlation between AdvanSix and Dow is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding AdvanSix and Dow Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Inc and AdvanSix 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 AdvanSix 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 AdvanSix i.e., AdvanSix and Dow go up and down completely randomly.

Pair Corralation between AdvanSix and Dow

Given the investment horizon of 90 days AdvanSix is expected to under-perform the Dow. But the stock apears to be less risky and, when comparing its historical volatility, AdvanSix is 1.3 times less risky than Dow. The stock trades about -0.22 of its potential returns per unit of risk. The Dow Inc is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  4,116  in Dow Inc on January 25, 2025 and sell it today you would lose (1,114) from holding Dow Inc or give up 27.07% of portfolio value over 90 days.

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

AdvanSix  vs.  Dow Inc

AdvanSix

Risk-Adjusted Performance

Very Weak

Over the last 90 days AdvanSix has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in May 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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 unfluctuating performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in May 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with AdvanSix and Dow

The main advantage of trading using opposite AdvanSix and Dow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AdvanSix 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 AdvanSix 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.