Correlation Between NYSE Composite and Doma Holdings

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

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

Diversification Opportunities for NYSE Composite and Doma Holdings

0.53

Correlation Coefficient

NYSE Composite  Doma Holdings

Very weak diversification

The 3 months correlation between NYSE and Doma is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Doma Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Doma Holdings 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 Doma Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Doma Holdings has no effect on the direction of NYSE Composite i.e., NYSE Composite and Doma Holdings go up and down completely randomly.

Pair Corralation between NYSE Composite and Doma Holdings

If you would invest  1,953,868  in NYSE Composite on September 4, 2024 and sell it today you would earn a total of  67,454  from holding NYSE Composite or generate 3.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	2.38%
Values	Daily Returns

NYSE Composite  vs.  Doma Holdings

Pair Trading with NYSE Composite and Doma Holdings

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

The idea behind NYSE Composite and Doma Holdings 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 Commodity Directory module to find actively traded commodities issued by global exchanges.