Correlation Between NYSE Composite and Puration

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

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

Diversification Opportunities for NYSE Composite and Puration

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Correlation Coefficient

NYSE Composite  Puration

Pay attention - limited upside

The 3 months correlation between NYSE and Puration is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Puration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Puration 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 Puration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Puration has no effect on the direction of NYSE Composite i.e., NYSE Composite and Puration go up and down completely randomly.

Pair Corralation between NYSE Composite and Puration

Assuming the 90 days trading horizon NYSE Composite is expected to generate 3.78 times less return on investment than Puration. But when comparing it to its historical volatility, NYSE Composite is 19.97 times less risky than Puration. It trades about 0.06 of its potential returns per unit of risk. Puration is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  0.20  in Puration on September 28, 2024 and sell it today you would lose (0.20) from holding Puration or give up 100.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

NYSE Composite  vs.  Puration

Pair Trading with NYSE Composite and Puration

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

The idea behind NYSE Composite and Puration 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..