Correlation Between NYSE Composite and Molecular Data

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Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Molecular Data 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 Molecular Data into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Molecular Data, you can compare the effects of market volatilities on NYSE Composite and Molecular Data 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 Molecular Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Molecular Data.

Diversification Opportunities for NYSE Composite and Molecular Data

-0.6
  Correlation Coefficient

Excellent diversification

The 3 months correlation between NYSE and Molecular is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Molecular Data in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Molecular Data 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 Molecular Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Molecular Data has no effect on the direction of NYSE Composite i.e., NYSE Composite and Molecular Data go up and down completely randomly.
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Pair Corralation between NYSE Composite and Molecular Data

Assuming the 90 days trading horizon NYSE Composite is expected to generate 1249.48 times less return on investment than Molecular Data. But when comparing it to its historical volatility, NYSE Composite is 357.46 times less risky than Molecular Data. It trades about 0.08 of its potential returns per unit of risk. Molecular Data is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  0.20  in Molecular Data on September 14, 2024 and sell it today you would earn a total of  0.60  from holding Molecular Data or generate 300.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy6.07%
ValuesDaily Returns

NYSE Composite  vs.  Molecular Data

 Performance 
       Timeline  

NYSE Composite and Molecular Data Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NYSE Composite and Molecular Data

The main advantage of trading using opposite NYSE Composite and Molecular Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Molecular Data 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 Molecular Data will offset losses from the drop in Molecular Data's long position.
The idea behind NYSE Composite and Molecular Data 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.

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