Correlation Between NYSE Composite and Shopify
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Shopify 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 Shopify into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Shopify, you can compare the effects of market volatilities on NYSE Composite and Shopify 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 Shopify. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Shopify.
Diversification Opportunities for NYSE Composite and Shopify
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NYSE and Shopify is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Shopify in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shopify 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 Shopify. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shopify has no effect on the direction of NYSE Composite i.e., NYSE Composite and Shopify go up and down completely randomly.
Pair Corralation between NYSE Composite and Shopify
Assuming the 90 days trading horizon NYSE Composite is expected to generate 2.31 times less return on investment than Shopify. But when comparing it to its historical volatility, NYSE Composite is 5.0 times less risky than Shopify. It trades about 0.13 of its potential returns per unit of risk. Shopify is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 7,386 in Shopify on August 27, 2024 and sell it today you would earn a total of 3,310 from holding Shopify or generate 44.81% 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. Shopify
Performance |
| Timeline |
NYSE Composite and Shopify Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Shopify
Pair trading matchups for Shopify
Pair Trading with NYSE Composite and Shopify
The main advantage of trading using opposite NYSE Composite and Shopify positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Shopify 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 Shopify will offset losses from the drop in Shopify's long position.| NYSE Composite vs. Hooker Furniture | NYSE Composite vs. Hudson Pacific Properties | NYSE Composite vs. Canlan Ice Sports | NYSE Composite vs. Boston Properties |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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