Correlation Between NYSE Composite and Medaro Mining

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

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

Diversification Opportunities for NYSE Composite and Medaro Mining

-0.21

Correlation Coefficient

NYSE Composite  Medaro Mining

Very good diversification

The 3 months correlation between NYSE and Medaro is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Medaro Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medaro Mining 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 Medaro Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medaro Mining Corp has no effect on the direction of NYSE Composite i.e., NYSE Composite and Medaro Mining go up and down completely randomly.

Pair Corralation between NYSE Composite and Medaro Mining

Assuming the 90 days trading horizon NYSE Composite is expected to generate 23.81 times less return on investment than Medaro Mining. But when comparing it to its historical volatility, NYSE Composite is 18.16 times less risky than Medaro Mining. It trades about 0.02 of its potential returns per unit of risk. Medaro Mining Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  10.00  in Medaro Mining Corp on December 29, 2024 and sell it today you would lose (3.15) from holding Medaro Mining Corp or give up 31.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.31%
Values	Daily Returns

NYSE Composite  vs.  Medaro Mining Corp

Pair Trading with NYSE Composite and Medaro Mining

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

The idea behind NYSE Composite and Medaro Mining 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.