Correlation Between NYSE Composite and Optimism
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Optimism 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 Optimism into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Optimism, you can compare the effects of market volatilities on NYSE Composite and Optimism 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 Optimism. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Optimism.
Diversification Opportunities for NYSE Composite and Optimism
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NYSE and Optimism is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Optimism in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optimism 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 Optimism. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optimism has no effect on the direction of NYSE Composite i.e., NYSE Composite and Optimism go up and down completely randomly.
Pair Corralation between NYSE Composite and Optimism
Assuming the 90 days trading horizon NYSE Composite is expected to generate 12.26 times less return on investment than Optimism. But when comparing it to its historical volatility, NYSE Composite is 11.84 times less risky than Optimism. It trades about 0.24 of its potential returns per unit of risk. Optimism is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 156.00 in Optimism on August 26, 2024 and sell it today you would earn a total of 67.00 from holding Optimism or generate 42.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Optimism
Performance |
| Timeline |
NYSE Composite and Optimism Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Optimism
Pair trading matchups for Optimism
Pair Trading with NYSE Composite and Optimism
The main advantage of trading using opposite NYSE Composite and Optimism positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Optimism 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 Optimism will offset losses from the drop in Optimism's long position.| NYSE Composite vs. Grocery Outlet Holding | NYSE Composite vs. Tencent Music Entertainment | NYSE Composite vs. SunLink Health Systems | NYSE Composite vs. Getty Realty |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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