Correlation Between NYSE Composite and Metalpha Technology

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

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

Diversification Opportunities for NYSE Composite and Metalpha Technology

0.12

Correlation Coefficient

NYSE Composite  Metalpha Technology

Average diversification

The 3 months correlation between NYSE and Metalpha is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Metalpha Technology Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metalpha Technology 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 Metalpha Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metalpha Technology has no effect on the direction of NYSE Composite i.e., NYSE Composite and Metalpha Technology go up and down completely randomly.

Pair Corralation between NYSE Composite and Metalpha Technology

Assuming the 90 days trading horizon NYSE Composite is expected to generate 59.51 times less return on investment than Metalpha Technology. But when comparing it to its historical volatility, NYSE Composite is 9.74 times less risky than Metalpha Technology. It trades about 0.05 of its potential returns per unit of risk. Metalpha Technology Holding is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  91.00  in Metalpha Technology Holding on November 20, 2024 and sell it today you would earn a total of  179.00  from holding Metalpha Technology Holding or generate 196.7% return on investment over 90 days.

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

NYSE Composite  vs.  Metalpha Technology Holding

Pair Trading with NYSE Composite and Metalpha Technology

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

The idea behind NYSE Composite and Metalpha Technology Holding 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.