Correlation Between NYSE Composite and CPI Card

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

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

Diversification Opportunities for NYSE Composite and CPI Card

0.65

Correlation Coefficient

NYSE Composite  CPI Card

Poor diversification

The 3 months correlation between NYSE and CPI is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and CPI Card Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CPI Card Group 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 CPI Card. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CPI Card Group has no effect on the direction of NYSE Composite i.e., NYSE Composite and CPI Card go up and down completely randomly.

Pair Corralation between NYSE Composite and CPI Card

Assuming the 90 days trading horizon NYSE Composite is expected to generate 13.45 times less return on investment than CPI Card. But when comparing it to its historical volatility, NYSE Composite is 7.4 times less risky than CPI Card. It trades about 0.07 of its potential returns per unit of risk. CPI Card Group is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,579  in CPI Card Group on September 16, 2024 and sell it today you would earn a total of  851.00  from holding CPI Card Group or generate 33.0% return on investment over 90 days.

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

NYSE Composite  vs.  CPI Card Group

Pair Trading with NYSE Composite and CPI Card

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

The idea behind NYSE Composite and CPI Card Group 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.