Correlation Between NYSE Composite and Roblox Corp

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

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

Diversification Opportunities for NYSE Composite and Roblox Corp

0.34

Correlation Coefficient

NYSE Composite  Roblox Corp

Weak diversification

The 3 months correlation between NYSE and Roblox is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Roblox Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roblox 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 Roblox Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roblox Corp has no effect on the direction of NYSE Composite i.e., NYSE Composite and Roblox Corp go up and down completely randomly.

Pair Corralation between NYSE Composite and Roblox Corp

Assuming the 90 days trading horizon NYSE Composite is expected to generate 2.83 times less return on investment than Roblox Corp. But when comparing it to its historical volatility, NYSE Composite is 5.32 times less risky than Roblox Corp. It trades about 0.17 of its potential returns per unit of risk. Roblox Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  4,292  in Roblox Corp on September 3, 2024 and sell it today you would earn a total of  721.00  from holding Roblox Corp or generate 16.8% return on investment over 90 days.

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

NYSE Composite  vs.  Roblox Corp

Pair Trading with NYSE Composite and Roblox Corp

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

The idea behind NYSE Composite and Roblox 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.