Correlation Between NYSE Composite and EI Du

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

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

Diversification Opportunities for NYSE Composite and EI Du

0.43

Correlation Coefficient

NYSE Composite  EI Du

Very weak diversification

The 3 months correlation between NYSE and CTA-P-A is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and EI du Pont in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EI du Pont 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 EI Du. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EI du Pont has no effect on the direction of NYSE Composite i.e., NYSE Composite and EI Du go up and down completely randomly.

Pair Corralation between NYSE Composite and EI Du

Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.52 times more return on investment than EI Du. However, NYSE Composite is 1.92 times less risky than EI Du. It trades about 0.18 of its potential returns per unit of risk. EI du Pont is currently generating about -0.21 per unit of risk. If you would invest  1,920,711  in NYSE Composite on October 23, 2024 and sell it today you would earn a total of  40,026  from holding NYSE Composite or generate 2.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	72.22%
Values	Daily Returns

NYSE Composite  vs.  EI du Pont

Pair Trading with NYSE Composite and EI Du

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

The idea behind NYSE Composite and EI du Pont 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.