Correlation Between NYSE Composite and Ellsworth Growth

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

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

Diversification Opportunities for NYSE Composite and Ellsworth Growth

-0.07

Correlation Coefficient

NYSE Composite  Ellsworth Growth

Good diversification

The 3 months correlation between NYSE and Ellsworth is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Ellsworth Growth and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ellsworth Growth 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 Ellsworth Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ellsworth Growth has no effect on the direction of NYSE Composite i.e., NYSE Composite and Ellsworth Growth go up and down completely randomly.

Pair Corralation between NYSE Composite and Ellsworth Growth

Assuming the 90 days trading horizon NYSE Composite is expected to under-perform the Ellsworth Growth. In addition to that, NYSE Composite is 1.25 times more volatile than Ellsworth Growth and. It trades about -0.23 of its total potential returns per unit of risk. Ellsworth Growth and is currently generating about -0.02 per unit of volatility. If you would invest  2,226  in Ellsworth Growth and on January 19, 2024 and sell it today you would lose (7.00) from holding Ellsworth Growth and or give up 0.31% 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.  Ellsworth Growth and

Pair Trading with NYSE Composite and Ellsworth Growth

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

The idea behind NYSE Composite and Ellsworth Growth and 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.