Correlation Between NYSE Composite and OCBCSP

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

By analyzing existing cross correlation between NYSE Composite and OCBCSP 1832 10 SEP 30, you can compare the effects of market volatilities on NYSE Composite and OCBCSP 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 OCBCSP. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and OCBCSP.

Diversification Opportunities for NYSE Composite and OCBCSP

0.01

Correlation Coefficient

NYSE Composite  OCBCSP

Significant diversification

The 3 months correlation between NYSE and OCBCSP is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and OCBCSP 1832 10 SEP 30 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OCBCSP 1832 10 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 OCBCSP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OCBCSP 1832 10 has no effect on the direction of NYSE Composite i.e., NYSE Composite and OCBCSP go up and down completely randomly.

Pair Corralation between NYSE Composite and OCBCSP

Assuming the 90 days trading horizon NYSE Composite is expected to under-perform the OCBCSP. In addition to that, NYSE Composite is 11.8 times more volatile than OCBCSP 1832 10 SEP 30. It trades about -0.25 of its total potential returns per unit of risk. OCBCSP 1832 10 SEP 30 is currently generating about 0.08 per unit of volatility. If you would invest  9,760  in OCBCSP 1832 10 SEP 30 on October 8, 2024 and sell it today you would earn a total of  2.00  from holding OCBCSP 1832 10 SEP 30 or generate 0.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	21.05%
Values	Daily Returns

NYSE Composite  vs.  OCBCSP 1832 10 SEP 30

Pair Trading with NYSE Composite and OCBCSP

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

The idea behind NYSE Composite and OCBCSP 1832 10 SEP 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.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.