Correlation Between NYSE Composite and Chalice Brands

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

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

Diversification Opportunities for NYSE Composite and Chalice Brands

-0.58

Correlation Coefficient

NYSE Composite  Chalice Brands

Excellent diversification

The 3 months correlation between NYSE and Chalice is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Chalice Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chalice Brands 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 Chalice Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chalice Brands has no effect on the direction of NYSE Composite i.e., NYSE Composite and Chalice Brands go up and down completely randomly.

Pair Corralation between NYSE Composite and Chalice Brands

Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.04 times more return on investment than Chalice Brands. However, NYSE Composite is 25.39 times less risky than Chalice Brands. It trades about 0.08 of its potential returns per unit of risk. Chalice Brands is currently generating about -0.17 per unit of risk. 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	Very Weak
Accuracy	98.44%
Values	Daily Returns

NYSE Composite  vs.  Chalice Brands

Pair Trading with NYSE Composite and Chalice Brands

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

The idea behind NYSE Composite and Chalice Brands 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.