Correlation Between NYSE Composite and 12511VAA6

Can any of the company-specific risk be diversified away by investing in both NYSE Composite and 12511VAA6 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 12511VAA6 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NYSE Composite and CHDN 575 01 APR 30, you can compare the effects of market volatilities on NYSE Composite and 12511VAA6 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 12511VAA6. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and 12511VAA6.

Diversification Opportunities for NYSE Composite and 12511VAA6

0.21

Correlation Coefficient

NYSE Composite  12511VAA6

Modest diversification

The 3 months correlation between NYSE and 12511VAA6 is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and CHDN 575 01 APR 30 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHDN 575 01 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 12511VAA6. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHDN 575 01 has no effect on the direction of NYSE Composite i.e., NYSE Composite and 12511VAA6 go up and down completely randomly.

Pair Corralation between NYSE Composite and 12511VAA6

Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.8 times more return on investment than 12511VAA6. However, NYSE Composite is 1.25 times less risky than 12511VAA6. It trades about 0.04 of its potential returns per unit of risk. CHDN 575 01 APR 30 is currently generating about -0.11 per unit of risk. If you would invest  1,936,450  in NYSE Composite on December 26, 2024 and sell it today you would earn a total of  31,394  from holding NYSE Composite or generate 1.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

NYSE Composite  vs.  CHDN 575 01 APR 30

Pair Trading with NYSE Composite and 12511VAA6

The main advantage of trading using opposite NYSE Composite and 12511VAA6 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, 12511VAA6 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 12511VAA6 will offset losses from the drop in 12511VAA6's long position.

The idea behind NYSE Composite and CHDN 575 01 APR 30 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.