Correlation Between NYSE Composite and LRN
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and LRN 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 LRN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and LRN, you can compare the effects of market volatilities on NYSE Composite and LRN 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 LRN. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and LRN.
Diversification Opportunities for NYSE Composite and LRN
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NYSE and LRN is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and LRN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LRN 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 LRN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LRN has no effect on the direction of NYSE Composite i.e., NYSE Composite and LRN go up and down completely randomly.
Pair Corralation between NYSE Composite and LRN
Assuming the 90 days trading horizon NYSE Composite is expected to generate 2.59 times less return on investment than LRN. But when comparing it to its historical volatility, NYSE Composite is 19.28 times less risky than LRN. It trades about 0.12 of its potential returns per unit of risk. LRN is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 0.53 in LRN on August 24, 2024 and sell it today you would lose (0.31) from holding LRN or give up 58.58% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 94.7% |
| Values | Daily Returns |
NYSE Composite vs. LRN
Performance |
| Timeline |
NYSE Composite and LRN Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
LRN
Pair trading matchups for LRN
Pair Trading with NYSE Composite and LRN
The main advantage of trading using opposite NYSE Composite and LRN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, LRN 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 LRN will offset losses from the drop in LRN's long position.| NYSE Composite vs. Akanda Corp | NYSE Composite vs. Valneva SE ADR | NYSE Composite vs. Radcom | NYSE Composite vs. Western Digital |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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