Correlation Between NYSE Composite and VIACOM

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

Diversification Opportunities for NYSE Composite and VIACOM

-0.14
  Correlation Coefficient

Good diversification

The 3 months correlation between NYSE and VIACOM is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and VIACOM INC NEW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VIACOM INC NEW 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 VIACOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VIACOM INC NEW has no effect on the direction of NYSE Composite i.e., NYSE Composite and VIACOM go up and down completely randomly.
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Pair Corralation between NYSE Composite and VIACOM

Assuming the 90 days trading horizon NYSE Composite is expected to generate 2.14 times less return on investment than VIACOM. But when comparing it to its historical volatility, NYSE Composite is 1.9 times less risky than VIACOM. It trades about 0.24 of its potential returns per unit of risk. VIACOM INC NEW is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  7,960  in VIACOM INC NEW on August 28, 2024 and sell it today you would earn a total of  504.00  from holding VIACOM INC NEW or generate 6.33% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy85.71%
ValuesDaily Returns

NYSE Composite  vs.  VIACOM INC NEW

 Performance 
       Timeline  

NYSE Composite and VIACOM Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NYSE Composite and VIACOM

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