Correlation Between NYSE Composite and Lucas GC

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

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

Diversification Opportunities for NYSE Composite and Lucas GC

0.26

Correlation Coefficient

NYSE Composite  Lucas GC

Modest diversification

The 3 months correlation between NYSE and Lucas is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Lucas GC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lucas GC Limited 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 Lucas GC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lucas GC Limited has no effect on the direction of NYSE Composite i.e., NYSE Composite and Lucas GC go up and down completely randomly.

Pair Corralation between NYSE Composite and Lucas GC

Assuming the 90 days trading horizon NYSE Composite is expected to under-perform the Lucas GC. But the index apears to be less risky and, when comparing its historical volatility, NYSE Composite is 11.05 times less risky than Lucas GC. The index trades about -0.04 of its potential returns per unit of risk. The Lucas GC Limited is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  67.00  in Lucas GC Limited on November 28, 2024 and sell it today you would lose (10.14) from holding Lucas GC Limited or give up 15.13% of portfolio value over 90 days.

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

NYSE Composite  vs.  Lucas GC Limited

Pair Trading with NYSE Composite and Lucas GC

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

The idea behind NYSE Composite and Lucas GC Limited 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.