Correlation Between NYSE Composite and Worley Parsons

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

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

Diversification Opportunities for NYSE Composite and Worley Parsons

-0.63

Correlation Coefficient

NYSE Composite  Worley Parsons

Excellent diversification

The 3 months correlation between NYSE and Worley is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Worley Parsons in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Worley Parsons 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 Worley Parsons. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Worley Parsons has no effect on the direction of NYSE Composite i.e., NYSE Composite and Worley Parsons go up and down completely randomly.

Pair Corralation between NYSE Composite and Worley Parsons

Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.24 times more return on investment than Worley Parsons. However, NYSE Composite is 4.14 times less risky than Worley Parsons. It trades about 0.1 of its potential returns per unit of risk. Worley Parsons is currently generating about -0.02 per unit of risk. If you would invest  1,679,840  in NYSE Composite on September 14, 2024 and sell it today you would earn a total of  297,069  from holding NYSE Composite or generate 17.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

NYSE Composite  vs.  Worley Parsons

Pair Trading with NYSE Composite and Worley Parsons

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

The idea behind NYSE Composite and Worley Parsons 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.