Correlation Between NYSE Composite and 78387GAM5

Can any of the company-specific risk be diversified away by investing in both NYSE Composite and 78387GAM5 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 78387GAM5 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NYSE Composite and SBC MUNICATIONS INC, you can compare the effects of market volatilities on NYSE Composite and 78387GAM5 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 78387GAM5. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and 78387GAM5.

Diversification Opportunities for NYSE Composite and 78387GAM5

0.73

Correlation Coefficient

NYSE Composite  78387GAM5

Poor diversification

The 3 months correlation between NYSE and 78387GAM5 is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and SBC MUNICATIONS INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBC MUNICATIONS INC 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 78387GAM5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBC MUNICATIONS INC has no effect on the direction of NYSE Composite i.e., NYSE Composite and 78387GAM5 go up and down completely randomly.

Pair Corralation between NYSE Composite and 78387GAM5

Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.32 times more return on investment than 78387GAM5. However, NYSE Composite is 3.12 times less risky than 78387GAM5. It trades about 0.2 of its potential returns per unit of risk. SBC MUNICATIONS INC is currently generating about 0.02 per unit of risk. If you would invest  1,826,715  in NYSE Composite on August 9, 2024 and sell it today you would earn a total of  156,085  from holding NYSE Composite or generate 8.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	34.92%
Values	Daily Returns

NYSE Composite  vs.  SBC MUNICATIONS INC

Pair Trading with NYSE Composite and 78387GAM5

The main advantage of trading using opposite NYSE Composite and 78387GAM5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, 78387GAM5 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 78387GAM5 will offset losses from the drop in 78387GAM5's long position.

The idea behind NYSE Composite and SBC MUNICATIONS INC 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.