Correlation Between NYSE Composite and BCPT
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and BCPT 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 BCPT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and BCPT, you can compare the effects of market volatilities on NYSE Composite and BCPT 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 BCPT. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and BCPT.
Diversification Opportunities for NYSE Composite and BCPT
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NYSE and BCPT is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and BCPT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCPT 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 BCPT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BCPT has no effect on the direction of NYSE Composite i.e., NYSE Composite and BCPT go up and down completely randomly.
Pair Corralation between NYSE Composite and BCPT
Assuming the 90 days trading horizon NYSE Composite is expected to generate 272.17 times less return on investment than BCPT. But when comparing it to its historical volatility, NYSE Composite is 174.2 times less risky than BCPT. It trades about 0.08 of its potential returns per unit of risk. BCPT is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 2.40 in BCPT on August 30, 2024 and sell it today you would lose (2.11) from holding BCPT or give up 87.97% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 60.28% |
| Values | Daily Returns |
NYSE Composite vs. BCPT
Performance |
| Timeline |
NYSE Composite and BCPT Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
BCPT
Pair trading matchups for BCPT
Pair Trading with NYSE Composite and BCPT
The main advantage of trading using opposite NYSE Composite and BCPT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, BCPT 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 BCPT will offset losses from the drop in BCPT's long position.| NYSE Composite vs. Delek Drilling | NYSE Composite vs. Helmerich and Payne | NYSE Composite vs. Waste Management | NYSE Composite vs. US Global Investors |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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