Correlation Between NYSE Composite and CO2 Energy

Can any of the company-specific risk be diversified away by investing in both NYSE Composite and CO2 Energy 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 CO2 Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NYSE Composite and CO2 Energy Transition, you can compare the effects of market volatilities on NYSE Composite and CO2 Energy 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 CO2 Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and CO2 Energy.

Diversification Opportunities for NYSE Composite and CO2 Energy

0.73

Correlation Coefficient

NYSE Composite  CO2 Energy

Poor diversification

The 3 months correlation between NYSE and CO2 is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and CO2 Energy Transition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CO2 Energy Transition 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 CO2 Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CO2 Energy Transition has no effect on the direction of NYSE Composite i.e., NYSE Composite and CO2 Energy go up and down completely randomly.

Pair Corralation between NYSE Composite and CO2 Energy

Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.5 times less return on investment than CO2 Energy. In addition to that, NYSE Composite is 1.25 times more volatile than CO2 Energy Transition. It trades about 0.02 of its total potential returns per unit of risk. CO2 Energy Transition is currently generating about 0.05 per unit of volatility. If you would invest  1,003  in CO2 Energy Transition on December 29, 2024 and sell it today you would earn a total of  17.00  from holding CO2 Energy Transition or generate 1.69% return on investment over 90 days.

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

NYSE Composite  vs.  CO2 Energy Transition

Pair Trading with NYSE Composite and CO2 Energy

The main advantage of trading using opposite NYSE Composite and CO2 Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, CO2 Energy 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 CO2 Energy will offset losses from the drop in CO2 Energy's long position.

The idea behind NYSE Composite and CO2 Energy Transition 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 CEOs Directory module to screen CEOs from public companies around the world.