Correlation Between NYSE Composite and Berkeley Lights

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

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

Diversification Opportunities for NYSE Composite and Berkeley Lights

-0.74

Correlation Coefficient

NYSE Composite  Berkeley Lights

Pay attention - limited upside

The 3 months correlation between NYSE and Berkeley is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Berkeley Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkeley Lights 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 Berkeley Lights. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Berkeley Lights has no effect on the direction of NYSE Composite i.e., NYSE Composite and Berkeley Lights go up and down completely randomly.

Pair Corralation between NYSE Composite and Berkeley Lights

If you would invest  1,922,578  in NYSE Composite on September 17, 2024 and sell it today you would earn a total of  50,359  from holding NYSE Composite or generate 2.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	1.56%
Values	Daily Returns

NYSE Composite  vs.  Berkeley Lights

Pair Trading with NYSE Composite and Berkeley Lights

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

The idea behind NYSE Composite and Berkeley Lights 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.