Correlation Between NYSE Composite and Rafarma Pharmaceuticals

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

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

Diversification Opportunities for NYSE Composite and Rafarma Pharmaceuticals

0.43

Correlation Coefficient

NYSE Composite  Rafarma Pharmaceuticals

Very weak diversification

The 3 months correlation between NYSE and Rafarma is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Rafarma Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rafarma Pharmaceuticals 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 Rafarma Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rafarma Pharmaceuticals has no effect on the direction of NYSE Composite i.e., NYSE Composite and Rafarma Pharmaceuticals go up and down completely randomly.

Pair Corralation between NYSE Composite and Rafarma Pharmaceuticals

Assuming the 90 days trading horizon NYSE Composite is expected to generate 55.94 times less return on investment than Rafarma Pharmaceuticals. But when comparing it to its historical volatility, NYSE Composite is 27.25 times less risky than Rafarma Pharmaceuticals. It trades about 0.08 of its potential returns per unit of risk. Rafarma Pharmaceuticals is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  3.80  in Rafarma Pharmaceuticals on September 17, 2024 and sell it today you would earn a total of  5.20  from holding Rafarma Pharmaceuticals or generate 136.84% 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.  Rafarma Pharmaceuticals

Pair Trading with NYSE Composite and Rafarma Pharmaceuticals

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

The idea behind NYSE Composite and Rafarma Pharmaceuticals 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.