Correlation Between NYSE Composite and RGC Resources

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

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

Diversification Opportunities for NYSE Composite and RGC Resources

0.63

Correlation Coefficient

NYSE Composite  RGC Resources

Poor diversification

The 3 months correlation between NYSE and RGC is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and RGC Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RGC Resources 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 RGC Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RGC Resources has no effect on the direction of NYSE Composite i.e., NYSE Composite and RGC Resources go up and down completely randomly.

Pair Corralation between NYSE Composite and RGC Resources

Assuming the 90 days trading horizon NYSE Composite is expected to generate 2.92 times less return on investment than RGC Resources. But when comparing it to its historical volatility, NYSE Composite is 2.48 times less risky than RGC Resources. It trades about 0.05 of its potential returns per unit of risk. RGC Resources is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,972  in RGC Resources on December 28, 2024 and sell it today you would earn a total of  128.00  from holding RGC Resources or generate 6.49% 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.  RGC Resources

Pair Trading with NYSE Composite and RGC Resources

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

The idea behind NYSE Composite and RGC Resources 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.