Correlation Between NYSE Composite and Earthfirst Techs

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

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

Diversification Opportunities for NYSE Composite and Earthfirst Techs

0.0

Correlation Coefficient

NYSE Composite  Earthfirst Techs

Pay attention - limited upside

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

Pair Corralation between NYSE Composite and Earthfirst Techs

If you would invest  1,533,260  in NYSE Composite on October 27, 2024 and sell it today you would earn a total of  466,487  from holding NYSE Composite or generate 30.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	48.86%
Values	Daily Returns

NYSE Composite  vs.  Earthfirst Techs

Pair Trading with NYSE Composite and Earthfirst Techs

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

The idea behind NYSE Composite and Earthfirst Techs 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.