Correlation Between NYSE Composite and Basilea Pharmaceutica

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

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

Diversification Opportunities for NYSE Composite and Basilea Pharmaceutica

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Correlation Coefficient

NYSE Composite  Basilea Pharmaceutica

Pay attention - limited upside

The 3 months correlation between NYSE and Basilea is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Basilea Pharmaceutica AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Basilea Pharmaceutica 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 Basilea Pharmaceutica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Basilea Pharmaceutica has no effect on the direction of NYSE Composite i.e., NYSE Composite and Basilea Pharmaceutica go up and down completely randomly.

Pair Corralation between NYSE Composite and Basilea Pharmaceutica

Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.62 times more return on investment than Basilea Pharmaceutica. However, NYSE Composite is 1.61 times less risky than Basilea Pharmaceutica. It trades about 0.06 of its potential returns per unit of risk. Basilea Pharmaceutica AG is currently generating about 0.01 per unit of risk. If you would invest  1,588,009  in NYSE Composite on October 12, 2024 and sell it today you would earn a total of  336,065  from holding NYSE Composite or generate 21.16% return on investment over 90 days.

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

NYSE Composite  vs.  Basilea Pharmaceutica AG

Pair Trading with NYSE Composite and Basilea Pharmaceutica

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

The idea behind NYSE Composite and Basilea Pharmaceutica AG 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.