Correlation Between NYSE Composite and Bioelectronics Corp

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

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

Diversification Opportunities for NYSE Composite and Bioelectronics Corp

0.19

Correlation Coefficient

NYSE Composite  Bioelectronics Corp

Average diversification

The 3 months correlation between NYSE and Bioelectronics is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Bioelectronics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bioelectronics Corp 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 Bioelectronics Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bioelectronics Corp has no effect on the direction of NYSE Composite i.e., NYSE Composite and Bioelectronics Corp go up and down completely randomly.

Pair Corralation between NYSE Composite and Bioelectronics Corp

Assuming the 90 days trading horizon NYSE Composite is expected to generate 64.42 times less return on investment than Bioelectronics Corp. But when comparing it to its historical volatility, NYSE Composite is 37.72 times less risky than Bioelectronics Corp. It trades about 0.07 of its potential returns per unit of risk. Bioelectronics Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  0.05  in Bioelectronics Corp on September 23, 2024 and sell it today you would lose (0.02) from holding Bioelectronics Corp or give up 40.0% 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.  Bioelectronics Corp

Pair Trading with NYSE Composite and Bioelectronics Corp

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

The idea behind NYSE Composite and Bioelectronics Corp 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.