Correlation Between NYSE Composite and EMCORE
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and EMCORE 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 EMCORE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and EMCORE, you can compare the effects of market volatilities on NYSE Composite and EMCORE 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 EMCORE. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and EMCORE.
Diversification Opportunities for NYSE Composite and EMCORE
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NYSE and EMCORE is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and EMCORE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMCORE 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 EMCORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMCORE has no effect on the direction of NYSE Composite i.e., NYSE Composite and EMCORE go up and down completely randomly.
Pair Corralation between NYSE Composite and EMCORE
Assuming the 90 days trading horizon NYSE Composite is expected to generate 18.45 times less return on investment than EMCORE. But when comparing it to its historical volatility, NYSE Composite is 10.03 times less risky than EMCORE. It trades about 0.13 of its potential returns per unit of risk. EMCORE is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 216.00 in EMCORE on August 24, 2024 and sell it today you would earn a total of 80.00 from holding EMCORE or generate 37.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. EMCORE
Performance |
| Timeline |
NYSE Composite and EMCORE Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
EMCORE
Pair trading matchups for EMCORE
Pair Trading with NYSE Composite and EMCORE
The main advantage of trading using opposite NYSE Composite and EMCORE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, EMCORE 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 EMCORE will offset losses from the drop in EMCORE's long position.| NYSE Composite vs. Awilco Drilling PLC | NYSE Composite vs. AKITA Drilling | NYSE Composite vs. SunOpta | NYSE Composite vs. Delek Drilling |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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