Correlation Between NYSE Composite and Stans Energy

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

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

Diversification Opportunities for NYSE Composite and Stans Energy

-0.46

Correlation Coefficient

NYSE Composite  Stans Energy

Very good diversification

The 3 months correlation between NYSE and Stans is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Stans Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stans Energy Corp 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 Stans Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stans Energy Corp has no effect on the direction of NYSE Composite i.e., NYSE Composite and Stans Energy go up and down completely randomly.

Pair Corralation between NYSE Composite and Stans Energy

Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.04 times more return on investment than Stans Energy. However, NYSE Composite is 22.55 times less risky than Stans Energy. It trades about 0.02 of its potential returns per unit of risk. Stans Energy Corp is currently generating about -0.04 per unit of risk. If you would invest  1,907,793  in NYSE Composite on December 29, 2024 and sell it today you would earn a total of  19,237  from holding NYSE Composite or generate 1.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

NYSE Composite  vs.  Stans Energy Corp

Pair Trading with NYSE Composite and Stans Energy

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

The idea behind NYSE Composite and Stans Energy Corp 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.