Correlation Between NYSE Composite and HHG Capital

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

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

Diversification Opportunities for NYSE Composite and HHG Capital

-0.67

Correlation Coefficient

NYSE Composite  HHG Capital

Excellent diversification

The 3 months correlation between NYSE and HHG is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and HHG Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HHG Capital 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 HHG Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HHG Capital has no effect on the direction of NYSE Composite i.e., NYSE Composite and HHG Capital go up and down completely randomly.

Pair Corralation between NYSE Composite and HHG Capital

Assuming the 90 days trading horizon NYSE Composite is expected to generate 337.82 times less return on investment than HHG Capital. But when comparing it to its historical volatility, NYSE Composite is 164.13 times less risky than HHG Capital. It trades about 0.13 of its potential returns per unit of risk. HHG Capital is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  0.30  in HHG Capital on September 12, 2024 and sell it today you would earn a total of  0.27  from holding HHG Capital or generate 90.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	20.31%
Values	Daily Returns

NYSE Composite  vs.  HHG Capital

Pair Trading with NYSE Composite and HHG Capital

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

The idea behind NYSE Composite and HHG Capital 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.