Correlation Between NYSE Composite and New Era

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Can any of the company-specific risk be diversified away by investing in both NYSE Composite and New Era 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 New Era into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and New Era Helium, you can compare the effects of market volatilities on NYSE Composite and New Era 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 New Era. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and New Era.

Diversification Opportunities for NYSE Composite and New Era

NYSENewDiversified AwayNYSENewDiversified Away100%
0.3
  Correlation Coefficient

Weak diversification

The 3 months correlation between NYSE and New is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and New Era Helium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Era Helium 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 New Era. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Era Helium has no effect on the direction of NYSE Composite i.e., NYSE Composite and New Era go up and down completely randomly.
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Pair Corralation between NYSE Composite and New Era

Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.08 times more return on investment than New Era. However, NYSE Composite is 12.59 times less risky than New Era. It trades about -0.02 of its potential returns per unit of risk. New Era Helium is currently generating about -0.22 per unit of risk. If you would invest  1,938,118  in NYSE Composite on September 25, 2024 and sell it today you would lose (17,407) from holding NYSE Composite or give up 0.9% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

NYSE Composite  vs.  New Era Helium

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -60-40-200
JavaScript chart by amCharts 3.21.15NYA NEHC
       Timeline  

NYSE Composite and New Era Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-1.01-0.73-0.45-0.17-0.01290.10.380.660.941.22 0.20.40.60.8
JavaScript chart by amCharts 3.21.15NYA NEHC
       Returns  

Pair Trading with NYSE Composite and New Era

The main advantage of trading using opposite NYSE Composite and New Era positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, New Era 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 New Era will offset losses from the drop in New Era's long position.
The idea behind NYSE Composite and New Era Helium 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.

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