Correlation Between NYSE Composite and GBank Financial

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

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

Diversification Opportunities for NYSE Composite and GBank Financial

0.33

Correlation Coefficient

NYSE Composite  GBank Financial

Weak diversification

The 3 months correlation between NYSE and GBank is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and GBank Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GBank Financial 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 GBank Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GBank Financial Holdings has no effect on the direction of NYSE Composite i.e., NYSE Composite and GBank Financial go up and down completely randomly.

Pair Corralation between NYSE Composite and GBank Financial

Assuming the 90 days trading horizon NYSE Composite is expected to under-perform the GBank Financial. But the index apears to be less risky and, when comparing its historical volatility, NYSE Composite is 4.36 times less risky than GBank Financial. The index trades about -0.03 of its potential returns per unit of risk. The GBank Financial Holdings is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  2,885  in GBank Financial Holdings on September 27, 2024 and sell it today you would earn a total of  630.00  from holding GBank Financial Holdings or generate 21.84% return on investment over 90 days.

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

NYSE Composite  vs.  GBank Financial Holdings

Pair Trading with NYSE Composite and GBank Financial

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

The idea behind NYSE Composite and GBank Financial 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.

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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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.