Correlation Between NYSE Composite and Limited Duration
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Limited Duration 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 Limited Duration into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Limited Duration Fund, you can compare the effects of market volatilities on NYSE Composite and Limited Duration 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 Limited Duration. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Limited Duration.
Diversification Opportunities for NYSE Composite and Limited Duration
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NYSE and Limited is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Limited Duration Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Limited Duration 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 Limited Duration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Limited Duration has no effect on the direction of NYSE Composite i.e., NYSE Composite and Limited Duration go up and down completely randomly.
Pair Corralation between NYSE Composite and Limited Duration
Assuming the 90 days trading horizon NYSE Composite is expected to generate 5.4 times more return on investment than Limited Duration. However, NYSE Composite is 5.4 times more volatile than Limited Duration Fund. It trades about 0.24 of its potential returns per unit of risk. Limited Duration Fund is currently generating about 0.12 per unit of risk. If you would invest 1,954,967 in NYSE Composite on August 28, 2024 and sell it today you would earn a total of 67,069 from holding NYSE Composite or generate 3.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Limited Duration Fund
Performance |
| Timeline |
NYSE Composite and Limited Duration Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Limited Duration Fund
Pair trading matchups for Limited Duration
Pair Trading with NYSE Composite and Limited Duration
The main advantage of trading using opposite NYSE Composite and Limited Duration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Limited Duration 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 Limited Duration will offset losses from the drop in Limited Duration's long position.| NYSE Composite vs. Hooker Furniture | NYSE Composite vs. Hudson Pacific Properties | NYSE Composite vs. Canlan Ice Sports | NYSE Composite vs. Boston Properties |
| Limited Duration vs. Bond Fund Investor | Limited Duration vs. Strategic Enhanced Yield | Limited Duration vs. Cavanal Hill Hedged | Limited Duration vs. World Energy Fund |
Check out your portfolio center.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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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