Correlation Between NYSE Composite and Shimadzu

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Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Shimadzu 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 Shimadzu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Shimadzu, you can compare the effects of market volatilities on NYSE Composite and Shimadzu 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 Shimadzu. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Shimadzu.

Diversification Opportunities for NYSE Composite and Shimadzu

NYSEShimadzuDiversified AwayNYSEShimadzuDiversified Away100%
0.25
  Correlation Coefficient

Modest diversification

The 3 months correlation between NYSE and Shimadzu is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Shimadzu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shimadzu 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 Shimadzu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shimadzu has no effect on the direction of NYSE Composite i.e., NYSE Composite and Shimadzu go up and down completely randomly.
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Pair Corralation between NYSE Composite and Shimadzu

Assuming the 90 days trading horizon NYSE Composite is expected to under-perform the Shimadzu. In addition to that, NYSE Composite is 6.83 times more volatile than Shimadzu. It trades about -0.04 of its total potential returns per unit of risk. Shimadzu is currently generating about 0.12 per unit of volatility. If you would invest  2,235  in Shimadzu on September 23, 2024 and sell it today you would earn a total of  17.00  from holding Shimadzu or generate 0.76% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy98.48%
ValuesDaily Returns

NYSE Composite  vs.  Shimadzu

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -101234
JavaScript chart by amCharts 3.21.15NYA SHMZF
       Timeline  

NYSE Composite and Shimadzu Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-1.01-0.73-0.45-0.17-0.01730.09620.370.650.931.21 10203040
JavaScript chart by amCharts 3.21.15NYA SHMZF
       Returns  

Pair Trading with NYSE Composite and Shimadzu

The main advantage of trading using opposite NYSE Composite and Shimadzu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Shimadzu 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 Shimadzu will offset losses from the drop in Shimadzu's long position.
The idea behind NYSE Composite and Shimadzu 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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