Correlation Between NYSE Composite and Golden Tag

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

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

Diversification Opportunities for NYSE Composite and Golden Tag

-0.66

Correlation Coefficient

NYSE Composite  Golden Tag

Excellent diversification

The 3 months correlation between NYSE and Golden is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Golden Tag Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Tag Resources 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 Golden Tag. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Tag Resources has no effect on the direction of NYSE Composite i.e., NYSE Composite and Golden Tag go up and down completely randomly.

Pair Corralation between NYSE Composite and Golden Tag

If you would invest  1,626,371  in NYSE Composite on September 12, 2024 and sell it today you would earn a total of  361,819  from holding NYSE Composite or generate 22.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	0.85%
Values	Daily Returns

NYSE Composite  vs.  Golden Tag Resources

Pair Trading with NYSE Composite and Golden Tag

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

The idea behind NYSE Composite and Golden Tag Resources 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.