Correlation Between NYSE Composite and Rapid Micro

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

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

Diversification Opportunities for NYSE Composite and Rapid Micro

0.5

Correlation Coefficient

NYSE Composite  Rapid Micro

Very weak diversification

The 3 months correlation between NYSE and Rapid is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Rapid Micro Biosystems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rapid Micro Biosystems 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 Rapid Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rapid Micro Biosystems has no effect on the direction of NYSE Composite i.e., NYSE Composite and Rapid Micro go up and down completely randomly.

Pair Corralation between NYSE Composite and Rapid Micro

Assuming the 90 days trading horizon NYSE Composite is expected to generate 57.32 times less return on investment than Rapid Micro. But when comparing it to its historical volatility, NYSE Composite is 11.25 times less risky than Rapid Micro. It trades about 0.04 of its potential returns per unit of risk. Rapid Micro Biosystems is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  107.00  in Rapid Micro Biosystems on November 27, 2024 and sell it today you would earn a total of  175.00  from holding Rapid Micro Biosystems or generate 163.55% 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.  Rapid Micro Biosystems

Pair Trading with NYSE Composite and Rapid Micro

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

The idea behind NYSE Composite and Rapid Micro Biosystems 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.