Correlation Between NYSE Composite and International Petroleum
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and International Petroleum 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 International Petroleum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and International Petroleum, you can compare the effects of market volatilities on NYSE Composite and International Petroleum 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 International Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and International Petroleum.
Diversification Opportunities for NYSE Composite and International Petroleum
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NYSE and International is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and International Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Petroleum 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 International Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Petroleum has no effect on the direction of NYSE Composite i.e., NYSE Composite and International Petroleum go up and down completely randomly.
Pair Corralation between NYSE Composite and International Petroleum
Assuming the 90 days trading horizon NYSE Composite is expected to generate 3.34 times less return on investment than International Petroleum. But when comparing it to its historical volatility, NYSE Composite is 2.86 times less risky than International Petroleum. It trades about 0.11 of its potential returns per unit of risk. International Petroleum is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 1,150 in International Petroleum on November 2, 2024 and sell it today you would earn a total of 185.00 from holding International Petroleum or generate 16.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. International Petroleum
Performance |
| Timeline |
NYSE Composite and International Petroleum Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
International Petroleum
Pair trading matchups for International Petroleum
Pair Trading with NYSE Composite and International Petroleum
The main advantage of trading using opposite NYSE Composite and International Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, International Petroleum 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 International Petroleum will offset losses from the drop in International Petroleum's long position.| NYSE Composite vs. Palomar Holdings | NYSE Composite vs. The Peoples Insurance | NYSE Composite vs. Radian Group | NYSE Composite vs. Nascent Wine |
| International Petroleum vs. 1st NRG Corp | International Petroleum vs. Otto Energy Limited | International Petroleum vs. Razor Energy Corp | International Petroleum vs. Prospera Energy |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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