Correlation Between NYSE Composite and UHF Logistics

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

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

Diversification Opportunities for NYSE Composite and UHF Logistics

-0.21

Correlation Coefficient

NYSE Composite  UHF Logistics

Very good diversification

The 3 months correlation between NYSE and UHF is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and UHF Logistics Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UHF Logistics 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 UHF Logistics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UHF Logistics Group has no effect on the direction of NYSE Composite i.e., NYSE Composite and UHF Logistics go up and down completely randomly.

Pair Corralation between NYSE Composite and UHF Logistics

Assuming the 90 days trading horizon NYSE Composite is expected to generate 34.2 times less return on investment than UHF Logistics. But when comparing it to its historical volatility, NYSE Composite is 57.55 times less risky than UHF Logistics. It trades about 0.18 of its potential returns per unit of risk. UHF Logistics Group is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  6.75  in UHF Logistics Group on September 5, 2024 and sell it today you would lose (2.76) from holding UHF Logistics Group or give up 40.89% of portfolio value over 90 days.

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

NYSE Composite  vs.  UHF Logistics Group

Pair Trading with NYSE Composite and UHF Logistics

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

The idea behind NYSE Composite and UHF Logistics 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.