Correlation Between NYSE Composite and United Amern

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

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

Diversification Opportunities for NYSE Composite and United Amern

-0.04

Correlation Coefficient

NYSE Composite  United Amern

Good diversification

The 3 months correlation between NYSE and United is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and United Amern Pete in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Amern Pete 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 United Amern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Amern Pete has no effect on the direction of NYSE Composite i.e., NYSE Composite and United Amern go up and down completely randomly.

Pair Corralation between NYSE Composite and United Amern

Assuming the 90 days trading horizon NYSE Composite is expected to under-perform the United Amern. But the index apears to be less risky and, when comparing its historical volatility, NYSE Composite is 23.09 times less risky than United Amern. The index trades about -0.03 of its potential returns per unit of risk. The United Amern Pete is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  0.11  in United Amern Pete on October 1, 2024 and sell it today you would lose (0.03) from holding United Amern Pete or give up 27.27% 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.  United Amern Pete

Pair Trading with NYSE Composite and United Amern

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

The idea behind NYSE Composite and United Amern Pete 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 Global Correlations module to find global opportunities by holding instruments from different markets.