Correlation Between NYSE Composite and SILAMX

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Can any of the company-specific risk be diversified away by investing in both NYSE Composite and SILAMX 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 SILAMX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and SILAMX 5375 04 APR 32, you can compare the effects of market volatilities on NYSE Composite and SILAMX 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 SILAMX. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and SILAMX.

Diversification Opportunities for NYSE Composite and SILAMX

-0.17
  Correlation Coefficient

Good diversification

The 3 months correlation between NYSE and SILAMX is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and SILAMX 5375 04 APR 32 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SILAMX 5375 04 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 SILAMX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SILAMX 5375 04 has no effect on the direction of NYSE Composite i.e., NYSE Composite and SILAMX go up and down completely randomly.
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Pair Corralation between NYSE Composite and SILAMX

Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.77 times more return on investment than SILAMX. However, NYSE Composite is 1.3 times less risky than SILAMX. It trades about 0.24 of its potential returns per unit of risk. SILAMX 5375 04 APR 32 is currently generating about -0.41 per unit of risk. If you would invest  1,954,967  in NYSE Composite on August 28, 2024 and sell it today you would earn a total of  67,069  from holding NYSE Composite or generate 3.43% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy90.48%
ValuesDaily Returns

NYSE Composite  vs.  SILAMX 5375 04 APR 32

 Performance 
       Timeline  

NYSE Composite and SILAMX Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NYSE Composite and SILAMX

The main advantage of trading using opposite NYSE Composite and SILAMX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, SILAMX 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 SILAMX will offset losses from the drop in SILAMX's long position.
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The idea behind NYSE Composite and SILAMX 5375 04 APR 32 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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