Correlation Between NYSE Composite and Global Partners

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

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

Diversification Opportunities for NYSE Composite and Global Partners

0.38

Correlation Coefficient

NYSE Composite  Global Partners

Weak diversification

The 3 months correlation between NYSE and Global is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Global Partners LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Partners LP 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 Global Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Partners LP has no effect on the direction of NYSE Composite i.e., NYSE Composite and Global Partners go up and down completely randomly.

Pair Corralation between NYSE Composite and Global Partners

Assuming the 90 days trading horizon NYSE Composite is expected to generate 2.32 times less return on investment than Global Partners. In addition to that, NYSE Composite is 4.48 times more volatile than Global Partners LP. It trades about 0.02 of its total potential returns per unit of risk. Global Partners LP is currently generating about 0.25 per unit of volatility. If you would invest  2,549  in Global Partners LP on December 30, 2024 and sell it today you would earn a total of  72.00  from holding Global Partners LP or generate 2.82% 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.  Global Partners LP

Pair Trading with NYSE Composite and Global Partners

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

The idea behind NYSE Composite and Global Partners LP 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.