Correlation Between NYSE Composite and ENTERPRISE

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Apply Can any of the company-specific risk be diversified away by investing in both NYSE Composite and ENTERPRISE 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 ENTERPRISE into the same portfolio, which is an essential part of the fundamental portfolio management process.

Diversification Opportunities for NYSE Composite and ENTERPRISE

Pair Corralation between NYSE Composite and ENTERPRISE

NYSE Composite  vs.  ENTERPRISE PRODS OPER

Pair Trading with NYSE Composite and ENTERPRISE

The main advantage of trading using opposite NYSE Composite and ENTERPRISE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, ENTERPRISE 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 ENTERPRISE will offset losses from the drop in ENTERPRISE's long position.The idea behind NYSE Composite and ENTERPRISE PRODS OPER 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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