Correlation Between NYSE Composite and Verastem
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Verastem 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 Verastem into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Verastem, you can compare the effects of market volatilities on NYSE Composite and Verastem 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 Verastem. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Verastem.
Diversification Opportunities for NYSE Composite and Verastem
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NYSE and Verastem is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Verastem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verastem 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 Verastem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verastem has no effect on the direction of NYSE Composite i.e., NYSE Composite and Verastem go up and down completely randomly.
Pair Corralation between NYSE Composite and Verastem
Assuming the 90 days trading horizon NYSE Composite is expected to generate 6.52 times less return on investment than Verastem. But when comparing it to its historical volatility, NYSE Composite is 7.61 times less risky than Verastem. It trades about 0.21 of its potential returns per unit of risk. Verastem is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 339.00 in Verastem on August 27, 2024 and sell it today you would earn a total of 61.00 from holding Verastem or generate 17.99% 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. Verastem
Performance |
| Timeline |
NYSE Composite and Verastem Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Verastem
Pair trading matchups for Verastem
Pair Trading with NYSE Composite and Verastem
The main advantage of trading using opposite NYSE Composite and Verastem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Verastem 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 Verastem will offset losses from the drop in Verastem's long position.| NYSE Composite vs. Grocery Outlet Holding | NYSE Composite vs. Tencent Music Entertainment | NYSE Composite vs. SunLink Health Systems | NYSE Composite vs. Getty Realty |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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