Correlation Between NYSE Composite and Stark Focus

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

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

Diversification Opportunities for NYSE Composite and Stark Focus

0.31

Correlation Coefficient

NYSE Composite  Stark Focus

Weak diversification

The 3 months correlation between NYSE and Stark is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Stark Focus Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stark Focus 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 Stark Focus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stark Focus Group has no effect on the direction of NYSE Composite i.e., NYSE Composite and Stark Focus go up and down completely randomly.

Pair Corralation between NYSE Composite and Stark Focus

Assuming the 90 days trading horizon NYSE Composite is expected to generate 10.89 times less return on investment than Stark Focus. But when comparing it to its historical volatility, NYSE Composite is 16.56 times less risky than Stark Focus. It trades about 0.17 of its potential returns per unit of risk. Stark Focus Group is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3.54  in Stark Focus Group on September 2, 2024 and sell it today you would earn a total of  1.93  from holding Stark Focus Group or generate 54.52% 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.  Stark Focus Group

Pair Trading with NYSE Composite and Stark Focus

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

The idea behind NYSE Composite and Stark Focus 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.