Correlation Between NYSE Composite and Pulse Biosciences

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

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

Diversification Opportunities for NYSE Composite and Pulse Biosciences

0.46

Correlation Coefficient

NYSE Composite  Pulse Biosciences

Very weak diversification

The 3 months correlation between NYSE and Pulse is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Pulse Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pulse Biosciences 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 Pulse Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pulse Biosciences has no effect on the direction of NYSE Composite i.e., NYSE Composite and Pulse Biosciences go up and down completely randomly.

Pair Corralation between NYSE Composite and Pulse Biosciences

Assuming the 90 days trading horizon NYSE Composite is expected to under-perform the Pulse Biosciences. But the index apears to be less risky and, when comparing its historical volatility, NYSE Composite is 8.12 times less risky than Pulse Biosciences. The index trades about -0.02 of its potential returns per unit of risk. The Pulse Biosciences is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,579  in Pulse Biosciences on October 8, 2024 and sell it today you would earn a total of  384.00  from holding Pulse Biosciences or generate 24.32% return on investment over 90 days.

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

NYSE Composite  vs.  Pulse Biosciences

Pair Trading with NYSE Composite and Pulse Biosciences

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

The idea behind NYSE Composite and Pulse Biosciences 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.