Correlation Between NYSE Composite and Pioneer Solutions

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

By analyzing existing cross correlation between NYSE Composite and Pioneer Solutions Balanced, you can compare the effects of market volatilities on NYSE Composite and Pioneer Solutions 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 Pioneer Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Pioneer Solutions.

Diversification Opportunities for NYSE Composite and Pioneer Solutions

0.28

Correlation Coefficient

NYSE Composite  Pioneer Solutions

Modest diversification

The 3 months correlation between NYSE and Pioneer is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Pioneer Solutions Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pioneer Solutions 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 Pioneer Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pioneer Solutions has no effect on the direction of NYSE Composite i.e., NYSE Composite and Pioneer Solutions go up and down completely randomly.

Pair Corralation between NYSE Composite and Pioneer Solutions

Assuming the 90 days trading horizon NYSE Composite is expected to generate 3.62 times less return on investment than Pioneer Solutions. In addition to that, NYSE Composite is 1.75 times more volatile than Pioneer Solutions Balanced. It trades about 0.02 of its total potential returns per unit of risk. Pioneer Solutions Balanced is currently generating about 0.15 per unit of volatility. If you would invest  1,117  in Pioneer Solutions Balanced on December 30, 2024 and sell it today you would earn a total of  49.00  from holding Pioneer Solutions Balanced or generate 4.39% return on investment over 90 days.

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

NYSE Composite  vs.  Pioneer Solutions Balanced

Pair Trading with NYSE Composite and Pioneer Solutions

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

The idea behind NYSE Composite and Pioneer Solutions Balanced 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.