Correlation Between NYSE Composite and Social Life
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Social Life 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 Social Life into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Social Life Network, you can compare the effects of market volatilities on NYSE Composite and Social Life 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 Social Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Social Life.
Diversification Opportunities for NYSE Composite and Social Life
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NYSE and Social is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Social Life Network in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Social Life Network 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 Social Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Social Life Network has no effect on the direction of NYSE Composite i.e., NYSE Composite and Social Life go up and down completely randomly.
Pair Corralation between NYSE Composite and Social Life
Assuming the 90 days trading horizon NYSE Composite is expected to generate 11.71 times less return on investment than Social Life. But when comparing it to its historical volatility, NYSE Composite is 19.92 times less risky than Social Life. It trades about 0.08 of its potential returns per unit of risk. Social Life Network is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 0.18 in Social Life Network on August 28, 2024 and sell it today you would lose (0.14) from holding Social Life Network or give up 77.78% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Social Life Network
Performance |
| Timeline |
NYSE Composite and Social Life Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Social Life Network
Pair trading matchups for Social Life
Pair Trading with NYSE Composite and Social Life
The main advantage of trading using opposite NYSE Composite and Social Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Social Life 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 Social Life will offset losses from the drop in Social Life's long position.| NYSE Composite vs. Vita Coco | NYSE Composite vs. Franklin Wireless Corp | NYSE Composite vs. Ambev SA ADR | NYSE Composite vs. Toro Co |
| Social Life vs. Salesforce | Social Life vs. SAP SE ADR | Social Life vs. ServiceNow | Social Life vs. Intuit Inc |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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