Correlation Between NYSE Composite and Numinus Wellness

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

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

Diversification Opportunities for NYSE Composite and Numinus Wellness

0.43

Correlation Coefficient

NYSE Composite  Numinus Wellness

Very weak diversification

The 3 months correlation between NYSE and Numinus is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Numinus Wellness in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Numinus Wellness 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 Numinus Wellness. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Numinus Wellness has no effect on the direction of NYSE Composite i.e., NYSE Composite and Numinus Wellness go up and down completely randomly.

Pair Corralation between NYSE Composite and Numinus Wellness

Assuming the 90 days trading horizon NYSE Composite is expected to under-perform the Numinus Wellness. But the index apears to be less risky and, when comparing its historical volatility, NYSE Composite is 19.58 times less risky than Numinus Wellness. The index trades about -0.04 of its potential returns per unit of risk. The Numinus Wellness is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2.36  in Numinus Wellness on September 23, 2024 and sell it today you would earn a total of  0.64  from holding Numinus Wellness or generate 27.12% return on investment over 90 days.

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

NYSE Composite  vs.  Numinus Wellness

Pair Trading with NYSE Composite and Numinus Wellness

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

The idea behind NYSE Composite and Numinus Wellness 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.