Correlation Between NYSE Composite and TRIMBLE

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

By analyzing existing cross correlation between NYSE Composite and TRIMBLE INC 475, you can compare the effects of market volatilities on NYSE Composite and TRIMBLE 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 TRIMBLE. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and TRIMBLE.

Diversification Opportunities for NYSE Composite and TRIMBLE

0.47

Correlation Coefficient

NYSE Composite  TRIMBLE

Very weak diversification

The 3 months correlation between NYSE and TRIMBLE is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and TRIMBLE INC 475 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRIMBLE INC 475 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 TRIMBLE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRIMBLE INC 475 has no effect on the direction of NYSE Composite i.e., NYSE Composite and TRIMBLE go up and down completely randomly.

Pair Corralation between NYSE Composite and TRIMBLE

Assuming the 90 days trading horizon NYSE Composite is expected to generate 2.18 times more return on investment than TRIMBLE. However, NYSE Composite is 2.18 times more volatile than TRIMBLE INC 475. It trades about 0.07 of its potential returns per unit of risk. TRIMBLE INC 475 is currently generating about 0.0 per unit of risk. If you would invest  1,551,444  in NYSE Composite on September 28, 2024 and sell it today you would earn a total of  385,006  from holding NYSE Composite or generate 24.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	86.87%
Values	Daily Returns

NYSE Composite  vs.  TRIMBLE INC 475

Pair Trading with NYSE Composite and TRIMBLE

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

The idea behind NYSE Composite and TRIMBLE INC 475 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.