Correlation Between NYSE Composite and Logistics Innovation

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

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

Diversification Opportunities for NYSE Composite and Logistics Innovation

-0.76

Correlation Coefficient

NYSE Composite  Logistics Innovation

Pay attention - limited upside

The 3 months correlation between NYSE and Logistics is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Logistics Innovation Technolog in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Logistics Innovation 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 Logistics Innovation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Logistics Innovation has no effect on the direction of NYSE Composite i.e., NYSE Composite and Logistics Innovation go up and down completely randomly.

Pair Corralation between NYSE Composite and Logistics Innovation

Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.03 times more return on investment than Logistics Innovation. However, NYSE Composite is 36.7 times less risky than Logistics Innovation. It trades about 0.08 of its potential returns per unit of risk. Logistics Innovation Technologies is currently generating about -0.04 per unit of risk. If you would invest  1,503,732  in NYSE Composite on September 18, 2024 and sell it today you would earn a total of  459,036  from holding NYSE Composite or generate 30.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	17.58%
Values	Daily Returns

NYSE Composite  vs.  Logistics Innovation Technolog

Pair Trading with NYSE Composite and Logistics Innovation

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

The idea behind NYSE Composite and Logistics Innovation Technologies 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.