Correlation Between NYSE Composite and American Equity
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and American Equity 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 American Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and American Equity Investment, you can compare the effects of market volatilities on NYSE Composite and American Equity 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 American Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and American Equity.
Diversification Opportunities for NYSE Composite and American Equity
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NYSE and American is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and American Equity Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Equity Inve 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 American Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Equity Inve has no effect on the direction of NYSE Composite i.e., NYSE Composite and American Equity go up and down completely randomly.
Pair Corralation between NYSE Composite and American Equity
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.72 times less return on investment than American Equity. In addition to that, NYSE Composite is 2.58 times more volatile than American Equity Investment. It trades about 0.11 of its total potential returns per unit of risk. American Equity Investment is currently generating about 0.47 per unit of volatility. If you would invest 5,277 in American Equity Investment on August 28, 2024 and sell it today you would earn a total of 98.00 from holding American Equity Investment or generate 1.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 4.24% |
| Values | Daily Returns |
NYSE Composite vs. American Equity Investment
Performance |
| Timeline |
NYSE Composite and American Equity Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
American Equity Investment
Pair trading matchups for American Equity
Pair Trading with NYSE Composite and American Equity
The main advantage of trading using opposite NYSE Composite and American Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, American Equity 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 American Equity will offset losses from the drop in American Equity's long position.| NYSE Composite vs. Vita Coco | NYSE Composite vs. Franklin Wireless Corp | NYSE Composite vs. Ambev SA ADR | NYSE Composite vs. Toro Co |
| American Equity vs. MetLife Preferred Stock | American Equity vs. Prudential Public Limited | American Equity vs. MetLife Preferred Stock | American Equity vs. Jackson Financial |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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