Correlation Between NYSE Composite and Orica
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Orica 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 Orica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Orica Limited, you can compare the effects of market volatilities on NYSE Composite and Orica 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 Orica. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Orica.
Diversification Opportunities for NYSE Composite and Orica
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between NYSE and Orica is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Orica Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orica Limited 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 Orica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orica Limited has no effect on the direction of NYSE Composite i.e., NYSE Composite and Orica go up and down completely randomly.
Pair Corralation between NYSE Composite and Orica
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.55 times less return on investment than Orica. But when comparing it to its historical volatility, NYSE Composite is 2.75 times less risky than Orica. It trades about 0.08 of its potential returns per unit of risk. Orica Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 855.00 in Orica Limited on August 30, 2024 and sell it today you would earn a total of 205.00 from holding Orica Limited or generate 23.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 59.8% |
| Values | Daily Returns |
NYSE Composite vs. Orica Limited
Performance |
| Timeline |
NYSE Composite and Orica Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Orica Limited
Pair trading matchups for Orica
Pair Trading with NYSE Composite and Orica
The main advantage of trading using opposite NYSE Composite and Orica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Orica 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 Orica will offset losses from the drop in Orica's long position.| NYSE Composite vs. Sphere Entertainment Co | NYSE Composite vs. Weibo Corp | NYSE Composite vs. BCE Inc | NYSE Composite vs. Pinterest |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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