Correlation Between NYSE Composite and Oppenhmr Discovery

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

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

Diversification Opportunities for NYSE Composite and Oppenhmr Discovery

0.83

Correlation Coefficient

NYSE Composite  Oppenhmr Discovery

Very poor diversification

The 3 months correlation between NYSE and Oppenhmr is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Oppenhmr Discovery Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oppenhmr Discovery Mid 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 Oppenhmr Discovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oppenhmr Discovery Mid has no effect on the direction of NYSE Composite i.e., NYSE Composite and Oppenhmr Discovery go up and down completely randomly.

Pair Corralation between NYSE Composite and Oppenhmr Discovery

Assuming the 90 days trading horizon NYSE Composite is expected to under-perform the Oppenhmr Discovery. But the index apears to be less risky and, when comparing its historical volatility, NYSE Composite is 1.95 times less risky than Oppenhmr Discovery. The index trades about -0.04 of its potential returns per unit of risk. The Oppenhmr Discovery Mid is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,418  in Oppenhmr Discovery Mid on September 22, 2024 and sell it today you would earn a total of  36.00  from holding Oppenhmr Discovery Mid or generate 1.05% return on investment over 90 days.

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

NYSE Composite  vs.  Oppenhmr Discovery Mid

Pair Trading with NYSE Composite and Oppenhmr Discovery

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

The idea behind NYSE Composite and Oppenhmr Discovery Mid 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.