Correlation Between NYSE Composite and Smart Share

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

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

Diversification Opportunities for NYSE Composite and Smart Share

0.6

Correlation Coefficient

NYSE Composite  Smart Share

Poor diversification

The 3 months correlation between NYSE and Smart is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Smart Share Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smart Share Global 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 Smart Share. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smart Share Global has no effect on the direction of NYSE Composite i.e., NYSE Composite and Smart Share go up and down completely randomly.

Pair Corralation between NYSE Composite and Smart Share

Assuming the 90 days trading horizon NYSE Composite is expected to under-perform the Smart Share. But the index apears to be less risky and, when comparing its historical volatility, NYSE Composite is 8.51 times less risky than Smart Share. The index trades about -0.16 of its potential returns per unit of risk. The Smart Share Global is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  63.00  in Smart Share Global on February 3, 2024 and sell it today you would earn a total of  24.00  from holding Smart Share Global or generate 38.1% return on investment over 90 days.

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

NYSE Composite  vs.  Smart Share Global

Pair Trading with NYSE Composite and Smart Share

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

The idea behind NYSE Composite and Smart Share Global 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.