Correlation Between NYSE Composite and North Carolina

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Can any of the company-specific risk be diversified away by investing in both NYSE Composite and North Carolina 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 North Carolina into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and North Carolina Tax Free, you can compare the effects of market volatilities on NYSE Composite and North Carolina 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 North Carolina. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and North Carolina.

Diversification Opportunities for NYSE Composite and North Carolina

0.64
  Correlation Coefficient

Poor diversification

The 3 months correlation between NYSE and North is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and North Carolina Tax Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North Carolina Tax 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 North Carolina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North Carolina Tax has no effect on the direction of NYSE Composite i.e., NYSE Composite and North Carolina go up and down completely randomly.
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Pair Corralation between NYSE Composite and North Carolina

Assuming the 90 days trading horizon NYSE Composite is expected to generate 3.39 times more return on investment than North Carolina. However, NYSE Composite is 3.39 times more volatile than North Carolina Tax Free. It trades about 0.09 of its potential returns per unit of risk. North Carolina Tax Free is currently generating about 0.01 per unit of risk. If you would invest  1,853,937  in NYSE Composite on October 26, 2024 and sell it today you would earn a total of  143,941  from holding NYSE Composite or generate 7.76% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

NYSE Composite  vs.  North Carolina Tax Free

 Performance 
       Timeline  

NYSE Composite and North Carolina Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NYSE Composite and North Carolina

The main advantage of trading using opposite NYSE Composite and North Carolina positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, North Carolina 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 North Carolina will offset losses from the drop in North Carolina's long position.
The idea behind NYSE Composite and North Carolina Tax Free pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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