Correlation Between NYSE Composite and Rev

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

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

Diversification Opportunities for NYSE Composite and Rev

0.67

Correlation Coefficient

NYSE Composite  Rev

Poor diversification

The 3 months correlation between NYSE and Rev is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Rev Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rev Group 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 Rev. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rev Group has no effect on the direction of NYSE Composite i.e., NYSE Composite and Rev go up and down completely randomly.

Pair Corralation between NYSE Composite and Rev

Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.2 times more return on investment than Rev. However, NYSE Composite is 5.0 times less risky than Rev. It trades about 0.16 of its potential returns per unit of risk. Rev Group is currently generating about 0.03 per unit of risk. If you would invest  1,901,742  in NYSE Composite on September 3, 2024 and sell it today you would earn a total of  119,580  from holding NYSE Composite or generate 6.29% 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.  Rev Group

Pair Trading with NYSE Composite and Rev

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

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