Correlation Between NYSE Composite and Il2m International

Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Il2m International 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 Il2m International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NYSE Composite and Il2m International Corp, you can compare the effects of market volatilities on NYSE Composite and Il2m International 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 Il2m International. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Il2m International.

Diversification Opportunities for NYSE Composite and Il2m International

-0.12

Correlation Coefficient

NYSE Composite  Il2m International

Good diversification

The 3 months correlation between NYSE and Il2m is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Il2m International Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Il2m International Corp 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 Il2m International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Il2m International Corp has no effect on the direction of NYSE Composite i.e., NYSE Composite and Il2m International go up and down completely randomly.

Pair Corralation between NYSE Composite and Il2m International

Assuming the 90 days trading horizon NYSE Composite is expected to generate 6.21 times less return on investment than Il2m International. But when comparing it to its historical volatility, NYSE Composite is 13.73 times less risky than Il2m International. It trades about 0.08 of its potential returns per unit of risk. Il2m International Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  0.03  in Il2m International Corp on September 17, 2024 and sell it today you would earn a total of  0.00  from holding Il2m International Corp or generate 0.0% 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.  Il2m International Corp

Pair Trading with NYSE Composite and Il2m International

The main advantage of trading using opposite NYSE Composite and Il2m International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Il2m International 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 Il2m International will offset losses from the drop in Il2m International's long position.

The idea behind NYSE Composite and Il2m International Corp 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.