Correlation Between NYSE Composite and USA Compression
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and USA Compression 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 USA Compression into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and USA Compression Partners, you can compare the effects of market volatilities on NYSE Composite and USA Compression 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 USA Compression. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and USA Compression.
Diversification Opportunities for NYSE Composite and USA Compression
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NYSE and USA is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and USA Compression Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USA Compression Partners 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 USA Compression. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USA Compression Partners has no effect on the direction of NYSE Composite i.e., NYSE Composite and USA Compression go up and down completely randomly.
Pair Corralation between NYSE Composite and USA Compression
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.99 times less return on investment than USA Compression. But when comparing it to its historical volatility, NYSE Composite is 2.48 times less risky than USA Compression. It trades about 0.27 of its potential returns per unit of risk. USA Compression Partners is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 2,223 in USA Compression Partners on August 30, 2024 and sell it today you would earn a total of 170.00 from holding USA Compression Partners or generate 7.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. USA Compression Partners
Performance |
| Timeline |
NYSE Composite and USA Compression Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
USA Compression Partners
Pair trading matchups for USA Compression
Pair Trading with NYSE Composite and USA Compression
The main advantage of trading using opposite NYSE Composite and USA Compression positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, USA Compression 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 USA Compression will offset losses from the drop in USA Compression's long position.| NYSE Composite vs. Sphere Entertainment Co | NYSE Composite vs. Weibo Corp | NYSE Composite vs. BCE Inc | NYSE Composite vs. Pinterest |
| USA Compression vs. Now Inc | USA Compression vs. Oil States International | USA Compression vs. Oceaneering International | USA Compression vs. Geospace Technologies |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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