Correlation Between NYSE Composite and Cocoa
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Cocoa 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 Cocoa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Cocoa, you can compare the effects of market volatilities on NYSE Composite and Cocoa 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 Cocoa. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Cocoa.
Diversification Opportunities for NYSE Composite and Cocoa
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NYSE and Cocoa is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Cocoa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cocoa 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 Cocoa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cocoa has no effect on the direction of NYSE Composite i.e., NYSE Composite and Cocoa go up and down completely randomly.
Pair Corralation between NYSE Composite and Cocoa
Assuming the 90 days trading horizon NYSE Composite is expected to generate 4.25 times less return on investment than Cocoa. But when comparing it to its historical volatility, NYSE Composite is 7.23 times less risky than Cocoa. It trades about 0.11 of its potential returns per unit of risk. Cocoa is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 645,000 in Cocoa on September 1, 2024 and sell it today you would earn a total of 294,200 from holding Cocoa or generate 45.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.47% |
| Values | Daily Returns |
NYSE Composite vs. Cocoa
Performance |
| Timeline |
NYSE Composite and Cocoa Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Cocoa
Pair trading matchups for Cocoa
Pair Trading with NYSE Composite and Cocoa
The main advantage of trading using opposite NYSE Composite and Cocoa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Cocoa 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 Cocoa will offset losses from the drop in Cocoa's long position.| NYSE Composite vs. Acumen Pharmaceuticals | NYSE Composite vs. Mind Medicine | NYSE Composite vs. NL Industries | NYSE Composite vs. Ecovyst |
| Cocoa vs. Oat Futures | Cocoa vs. Wheat Futures | Cocoa vs. Feeder Cattle Futures | Cocoa vs. Micro Silver Futures |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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