Correlation Between NYSE Composite and Special Opportunities
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Special Opportunities 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 Special Opportunities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Special Opportunities Closed, you can compare the effects of market volatilities on NYSE Composite and Special Opportunities 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 Special Opportunities. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Special Opportunities.
Diversification Opportunities for NYSE Composite and Special Opportunities
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NYSE and Special is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Special Opportunities Closed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Special Opportunities 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 Special Opportunities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Special Opportunities has no effect on the direction of NYSE Composite i.e., NYSE Composite and Special Opportunities go up and down completely randomly.
Pair Corralation between NYSE Composite and Special Opportunities
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.03 times less return on investment than Special Opportunities. But when comparing it to its historical volatility, NYSE Composite is 1.64 times less risky than Special Opportunities. It trades about 0.41 of its potential returns per unit of risk. Special Opportunities Closed is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 1,463 in Special Opportunities Closed on September 2, 2024 and sell it today you would earn a total of 79.00 from holding Special Opportunities Closed or generate 5.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Special Opportunities Closed
Performance |
| Timeline |
NYSE Composite and Special Opportunities Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Special Opportunities Closed
Pair trading matchups for Special Opportunities
Pair Trading with NYSE Composite and Special Opportunities
The main advantage of trading using opposite NYSE Composite and Special Opportunities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Special Opportunities 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 Special Opportunities will offset losses from the drop in Special Opportunities' long position.| NYSE Composite vs. Simon Property Group | NYSE Composite vs. Merit Medical Systems | NYSE Composite vs. Catalent | NYSE Composite vs. Titan Machinery |
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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