Correlation Between NYSE Composite and CD Projekt

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

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

Diversification Opportunities for NYSE Composite and CD Projekt

-0.55

Correlation Coefficient

NYSE Composite  CD Projekt

Excellent diversification

The 3 months correlation between NYSE and OTGLF is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and CD Projekt SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CD Projekt SA 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 CD Projekt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CD Projekt SA has no effect on the direction of NYSE Composite i.e., NYSE Composite and CD Projekt go up and down completely randomly.

Pair Corralation between NYSE Composite and CD Projekt

Assuming the 90 days trading horizon NYSE Composite is expected to under-perform the CD Projekt. But the index apears to be less risky and, when comparing its historical volatility, NYSE Composite is 1.63 times less risky than CD Projekt. The index trades about -0.28 of its potential returns per unit of risk. The CD Projekt SA is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  4,500  in CD Projekt SA on October 7, 2024 and sell it today you would lose (60.00) from holding CD Projekt SA or give up 1.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

NYSE Composite  vs.  CD Projekt SA

Pair Trading with NYSE Composite and CD Projekt

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

The idea behind NYSE Composite and CD Projekt SA 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.