Correlation Between NYSE Composite and CN Energy

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

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

Diversification Opportunities for NYSE Composite and CN Energy

-0.14

Correlation Coefficient

NYSE Composite  CN Energy

Good diversification

The 3 months correlation between NYSE and CNEY is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and CN Energy Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CN Energy Group 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 CN Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CN Energy Group has no effect on the direction of NYSE Composite i.e., NYSE Composite and CN Energy go up and down completely randomly.

Pair Corralation between NYSE Composite and CN Energy

Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.04 times more return on investment than CN Energy. However, NYSE Composite is 25.68 times less risky than CN Energy. It trades about 0.08 of its potential returns per unit of risk. CN Energy Group is currently generating about 0.0 per unit of risk. If you would invest  1,518,228  in NYSE Composite on September 5, 2024 and sell it today you would earn a total of  500,353  from holding NYSE Composite or generate 32.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

NYSE Composite  vs.  CN Energy Group

Pair Trading with NYSE Composite and CN Energy

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

The idea behind NYSE Composite and CN Energy Group 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.