Correlation Between NYSE Composite and Swell Network

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

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

Diversification Opportunities for NYSE Composite and Swell Network

-0.68

Correlation Coefficient

NYSE Composite  Swell Network

Excellent diversification

The 3 months correlation between NYSE and Swell is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Swell Network in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swell Network 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 Swell Network. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swell Network has no effect on the direction of NYSE Composite i.e., NYSE Composite and Swell Network go up and down completely randomly.

Pair Corralation between NYSE Composite and Swell Network

Assuming the 90 days trading horizon NYSE Composite is expected to under-perform the Swell Network. But the index apears to be less risky and, when comparing its historical volatility, NYSE Composite is 284.36 times less risky than Swell Network. The index trades about -0.21 of its potential returns per unit of risk. The Swell Network is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  0.00  in Swell Network on October 12, 2024 and sell it today you would earn a total of  2.70  from holding Swell Network or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

NYSE Composite  vs.  Swell Network

Pair Trading with NYSE Composite and Swell Network

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

The idea behind NYSE Composite and Swell Network 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 Global Correlations module to find global opportunities by holding instruments from different markets.