Correlation Between NYSE Composite and Vicinity

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

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

Diversification Opportunities for NYSE Composite and Vicinity

-0.64

Correlation Coefficient

NYSE Composite  Vicinity

Excellent diversification

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

Pair Corralation between NYSE Composite and Vicinity

Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.03 times more return on investment than Vicinity. However, NYSE Composite is 39.08 times less risky than Vicinity. It trades about 0.07 of its potential returns per unit of risk. Vicinity Motor Corp is currently generating about -0.13 per unit of risk. If you would invest  1,925,638  in NYSE Composite on September 16, 2024 and sell it today you would earn a total of  47,299  from holding NYSE Composite or generate 2.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

NYSE Composite  vs.  Vicinity Motor Corp

Pair Trading with NYSE Composite and Vicinity

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

The idea behind NYSE Composite and Vicinity Motor Corp 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 Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.