Correlation Between NYSE Composite and Thoughtworks Holding

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

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

Diversification Opportunities for NYSE Composite and Thoughtworks Holding

0.73

Correlation Coefficient

NYSE Composite  Thoughtworks Holding

Poor diversification

The 3 months correlation between NYSE and Thoughtworks is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Thoughtworks Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thoughtworks Holding 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 Thoughtworks Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thoughtworks Holding has no effect on the direction of NYSE Composite i.e., NYSE Composite and Thoughtworks Holding go up and down completely randomly.

Pair Corralation between NYSE Composite and Thoughtworks Holding

Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.05 times less return on investment than Thoughtworks Holding. In addition to that, NYSE Composite is 1.34 times more volatile than Thoughtworks Holding. It trades about 0.08 of its total potential returns per unit of risk. Thoughtworks Holding is currently generating about 0.11 per unit of volatility. If you would invest  439.00  in Thoughtworks Holding on September 17, 2024 and sell it today you would earn a total of  8.00  from holding Thoughtworks Holding or generate 1.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	65.63%
Values	Daily Returns

NYSE Composite  vs.  Thoughtworks Holding

Pair Trading with NYSE Composite and Thoughtworks Holding

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

The idea behind NYSE Composite and Thoughtworks Holding 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.