Correlation Between NYSE Composite and Revelation Biosciences

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

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

Diversification Opportunities for NYSE Composite and Revelation Biosciences

0.07

Correlation Coefficient

NYSE Composite  Revelation Biosciences

Significant diversification

The 3 months correlation between NYSE and Revelation is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Revelation Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Revelation Biosciences 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 Revelation Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Revelation Biosciences has no effect on the direction of NYSE Composite i.e., NYSE Composite and Revelation Biosciences go up and down completely randomly.

Pair Corralation between NYSE Composite and Revelation Biosciences

Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.94 times less return on investment than Revelation Biosciences. But when comparing it to its historical volatility, NYSE Composite is 14.82 times less risky than Revelation Biosciences. It trades about 0.17 of its potential returns per unit of risk. Revelation Biosciences is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1.39  in Revelation Biosciences on August 31, 2024 and sell it today you would lose (0.16) from holding Revelation Biosciences or give up 11.51% of portfolio value over 90 days.

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

NYSE Composite  vs.  Revelation Biosciences

Pair Trading with NYSE Composite and Revelation Biosciences

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

The idea behind NYSE Composite and Revelation Biosciences 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.