Correlation Between NYSE Composite and Trio Tech

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

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

Diversification Opportunities for NYSE Composite and Trio Tech

0.64

Correlation Coefficient

NYSE Composite  Trio Tech

Poor diversification

The 3 months correlation between NYSE and Trio is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Trio Tech International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trio Tech International 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 Trio Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trio Tech International has no effect on the direction of NYSE Composite i.e., NYSE Composite and Trio Tech go up and down completely randomly.

Pair Corralation between NYSE Composite and Trio Tech

Assuming the 90 days trading horizon NYSE Composite is expected to under-perform the Trio Tech. But the index apears to be less risky and, when comparing its historical volatility, NYSE Composite is 5.26 times less risky than Trio Tech. The index trades about -0.03 of its potential returns per unit of risk. The Trio Tech International is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  568.00  in Trio Tech International on October 1, 2024 and sell it today you would earn a total of  23.00  from holding Trio Tech International or generate 4.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

NYSE Composite  vs.  Trio Tech International

Pair Trading with NYSE Composite and Trio Tech

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

The idea behind NYSE Composite and Trio Tech International 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.