Correlation Between NYSE Composite and Valuence Merger

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

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

Diversification Opportunities for NYSE Composite and Valuence Merger

-0.38

Correlation Coefficient

NYSE Composite  Valuence Merger

Very good diversification

The 3 months correlation between NYSE and Valuence is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Valuence Merger Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valuence Merger Corp 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 Valuence Merger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valuence Merger Corp has no effect on the direction of NYSE Composite i.e., NYSE Composite and Valuence Merger go up and down completely randomly.

Pair Corralation between NYSE Composite and Valuence Merger

Assuming the 90 days trading horizon NYSE Composite is expected to generate 369.81 times less return on investment than Valuence Merger. But when comparing it to its historical volatility, NYSE Composite is 167.07 times less risky than Valuence Merger. It trades about 0.06 of its potential returns per unit of risk. Valuence Merger Corp is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  7.86  in Valuence Merger Corp on October 7, 2024 and sell it today you would lose (2.86) from holding Valuence Merger Corp or give up 36.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	43.75%
Values	Daily Returns

NYSE Composite  vs.  Valuence Merger Corp

Pair Trading with NYSE Composite and Valuence Merger

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

The idea behind NYSE Composite and Valuence Merger Corp 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.