Correlation Between NYSE Composite and G1 Therapeutics

Can any of the company-specific risk be diversified away by investing in both NYSE Composite and G1 Therapeutics 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 G1 Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NYSE Composite and G1 Therapeutics, you can compare the effects of market volatilities on NYSE Composite and G1 Therapeutics 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 G1 Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and G1 Therapeutics.

Diversification Opportunities for NYSE Composite and G1 Therapeutics

0.48

Correlation Coefficient

NYSE Composite  G1 Therapeutics

Very weak diversification

The 3 months correlation between NYSE and GTHX is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and G1 Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on G1 Therapeutics 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 G1 Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of G1 Therapeutics has no effect on the direction of NYSE Composite i.e., NYSE Composite and G1 Therapeutics go up and down completely randomly.

Pair Corralation between NYSE Composite and G1 Therapeutics

Assuming the 90 days trading horizon NYSE Composite is expected to generate 7.35 times less return on investment than G1 Therapeutics. But when comparing it to its historical volatility, NYSE Composite is 10.48 times less risky than G1 Therapeutics. It trades about 0.07 of its potential returns per unit of risk. G1 Therapeutics is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  573.00  in G1 Therapeutics on September 22, 2024 and sell it today you would earn a total of  142.00  from holding G1 Therapeutics or generate 24.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	86.69%
Values	Daily Returns

NYSE Composite  vs.  G1 Therapeutics

Pair Trading with NYSE Composite and G1 Therapeutics

The main advantage of trading using opposite NYSE Composite and G1 Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, G1 Therapeutics 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 G1 Therapeutics will offset losses from the drop in G1 Therapeutics' long position.

The idea behind NYSE Composite and G1 Therapeutics 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.