Correlation Between NYSE Composite and TrueShares Structured

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

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

Diversification Opportunities for NYSE Composite and TrueShares Structured

0.66

Correlation Coefficient

NYSE Composite  TrueShares Structured

Poor diversification

The 3 months correlation between NYSE and TrueShares is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and TrueShares Structured Outcome in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TrueShares Structured 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 TrueShares Structured. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TrueShares Structured has no effect on the direction of NYSE Composite i.e., NYSE Composite and TrueShares Structured go up and down completely randomly.

Pair Corralation between NYSE Composite and TrueShares Structured

Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.07 times more return on investment than TrueShares Structured. However, NYSE Composite is 1.07 times more volatile than TrueShares Structured Outcome. It trades about -0.02 of its potential returns per unit of risk. TrueShares Structured Outcome is currently generating about -0.03 per unit of risk. If you would invest  2,021,322  in NYSE Composite on December 2, 2024 and sell it today you would lose (18,503) from holding NYSE Composite or give up 0.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

NYSE Composite  vs.  TrueShares Structured Outcome

Pair Trading with NYSE Composite and TrueShares Structured

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

The idea behind NYSE Composite and TrueShares Structured Outcome 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..