Correlation Between NYSE Composite and Alumina
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Alumina 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 Alumina into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Alumina Limited, you can compare the effects of market volatilities on NYSE Composite and Alumina 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 Alumina. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Alumina.
Diversification Opportunities for NYSE Composite and Alumina
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between NYSE and Alumina is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Alumina Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alumina Limited 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 Alumina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alumina Limited has no effect on the direction of NYSE Composite i.e., NYSE Composite and Alumina go up and down completely randomly.
Pair Corralation between NYSE Composite and Alumina
Assuming the 90 days trading horizon NYSE Composite is expected to generate 42.96 times less return on investment than Alumina. But when comparing it to its historical volatility, NYSE Composite is 6.22 times less risky than Alumina. It trades about 0.03 of its potential returns per unit of risk. Alumina Limited is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 74.00 in Alumina Limited on March 6, 2024 and sell it today you would earn a total of 49.00 from holding Alumina Limited or generate 66.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.41% |
| Values | Daily Returns |
NYSE Composite vs. Alumina Limited
Performance |
| Timeline |
NYSE Composite and Alumina Volatility Contrast
Predicted Return Density |
| Returns |