Correlation Between NYSE Composite and MBGGR

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

By analyzing existing cross correlation between NYSE Composite and MBGGR 375 22 FEB 28, you can compare the effects of market volatilities on NYSE Composite and MBGGR 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 MBGGR. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and MBGGR.

Diversification Opportunities for NYSE Composite and MBGGR

0.31

Correlation Coefficient

NYSE Composite  MBGGR

Weak diversification

The 3 months correlation between NYSE and MBGGR is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and MBGGR 375 22 FEB 28 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MBGGR 375 22 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 MBGGR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MBGGR 375 22 has no effect on the direction of NYSE Composite i.e., NYSE Composite and MBGGR go up and down completely randomly.

Pair Corralation between NYSE Composite and MBGGR

Assuming the 90 days trading horizon NYSE Composite is expected to under-perform the MBGGR. In addition to that, NYSE Composite is 1.41 times more volatile than MBGGR 375 22 FEB 28. It trades about -0.36 of its total potential returns per unit of risk. MBGGR 375 22 FEB 28 is currently generating about -0.29 per unit of volatility. If you would invest  9,679  in MBGGR 375 22 FEB 28 on September 23, 2024 and sell it today you would lose (147.00) from holding MBGGR 375 22 FEB 28 or give up 1.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	52.38%
Values	Daily Returns

NYSE Composite  vs.  MBGGR 375 22 FEB 28

Pair Trading with NYSE Composite and MBGGR

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

The idea behind NYSE Composite and MBGGR 375 22 FEB 28 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.