Correlation Between NYSE Composite and DIGNITY

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Can any of the company-specific risk be diversified away by investing in both NYSE Composite and DIGNITY 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 DIGNITY into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and DIGNITY HEALTH 3812, you can compare the effects of market volatilities on NYSE Composite and DIGNITY 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 DIGNITY. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and DIGNITY.

Diversification Opportunities for NYSE Composite and DIGNITY

-0.25
  Correlation Coefficient

Very good diversification

The 3 months correlation between NYSE and DIGNITY is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and DIGNITY HEALTH 3812 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DIGNITY HEALTH 3812 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 DIGNITY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DIGNITY HEALTH 3812 has no effect on the direction of NYSE Composite i.e., NYSE Composite and DIGNITY go up and down completely randomly.
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Pair Corralation between NYSE Composite and DIGNITY

Assuming the 90 days trading horizon NYSE Composite is expected to generate 45.39 times less return on investment than DIGNITY. But when comparing it to its historical volatility, NYSE Composite is 91.28 times less risky than DIGNITY. It trades about 0.11 of its potential returns per unit of risk. DIGNITY HEALTH 3812 is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  9,784  in DIGNITY HEALTH 3812 on August 31, 2024 and sell it today you would earn a total of  8.00  from holding DIGNITY HEALTH 3812 or generate 0.08% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy71.66%
ValuesDaily Returns

NYSE Composite  vs.  DIGNITY HEALTH 3812

 Performance 
       Timeline  

NYSE Composite and DIGNITY Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NYSE Composite and DIGNITY

The main advantage of trading using opposite NYSE Composite and DIGNITY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, DIGNITY 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 DIGNITY will offset losses from the drop in DIGNITY's long position.
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The idea behind NYSE Composite and DIGNITY HEALTH 3812 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 Stocks Directory module to find actively traded stocks across global markets.

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