Correlation Between NYSE Composite and Cell Source

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

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

Diversification Opportunities for NYSE Composite and Cell Source

0.24

Correlation Coefficient

NYSE Composite  Cell Source

Modest diversification

The 3 months correlation between NYSE and Cell is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Cell Source in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cell Source 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 Cell Source. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cell Source has no effect on the direction of NYSE Composite i.e., NYSE Composite and Cell Source go up and down completely randomly.

Pair Corralation between NYSE Composite and Cell Source

Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.07 times more return on investment than Cell Source. However, NYSE Composite is 14.98 times less risky than Cell Source. It trades about -0.38 of its potential returns per unit of risk. Cell Source is currently generating about -0.22 per unit of risk. If you would invest  2,018,860  in NYSE Composite on October 5, 2024 and sell it today you would lose (109,318) from holding NYSE Composite or give up 5.41% of portfolio value over 90 days.

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

NYSE Composite  vs.  Cell Source

Pair Trading with NYSE Composite and Cell Source

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

The idea behind NYSE Composite and Cell Source 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.

Check out your portfolio center.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.