Correlation Between NYSE Composite and Amana Developing

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

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

Diversification Opportunities for NYSE Composite and Amana Developing

0.13

Correlation Coefficient

NYSE Composite  Amana Developing

Average diversification

The 3 months correlation between NYSE and Amana is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Amana Developing World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amana Developing World and NYSE Composite 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 NYSE Composite are associated (or correlated) with Amana Developing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amana Developing World has no effect on the direction of NYSE Composite i.e., NYSE Composite and Amana Developing go up and down completely randomly.

Pair Corralation between NYSE Composite and Amana Developing

Assuming the 90 days trading horizon NYSE Composite is expected to under-perform the Amana Developing. In addition to that, NYSE Composite is 1.23 times more volatile than Amana Developing World. It trades about -0.28 of its total potential returns per unit of risk. Amana Developing World is currently generating about -0.17 per unit of volatility. If you would invest  1,384  in Amana Developing World on October 7, 2024 and sell it today you would lose (30.00) from holding Amana Developing World or give up 2.17% of portfolio value over 90 days.

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

NYSE Composite  vs.  Amana Developing World

Pair Trading with NYSE Composite and Amana Developing

The main advantage of trading using opposite NYSE Composite and Amana Developing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Amana Developing 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 Amana Developing will offset losses from the drop in Amana Developing's long position.

The idea behind NYSE Composite and Amana Developing World 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.