Correlation Between NYSE Composite and Equity Income
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Equity Income 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 Equity Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Equity Income Fund, you can compare the effects of market volatilities on NYSE Composite and Equity Income 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 Equity Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Equity Income.
Diversification Opportunities for NYSE Composite and Equity Income
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NYSE and Equity is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Equity Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Income 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 Equity Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Income has no effect on the direction of NYSE Composite i.e., NYSE Composite and Equity Income go up and down completely randomly.
Pair Corralation between NYSE Composite and Equity Income
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.24 times more return on investment than Equity Income. However, NYSE Composite is 1.24 times more volatile than Equity Income Fund. It trades about 0.12 of its potential returns per unit of risk. Equity Income Fund is currently generating about 0.09 per unit of risk. If you would invest 1,950,655 in NYSE Composite on August 25, 2024 and sell it today you would earn a total of 61,690 from holding NYSE Composite or generate 3.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Equity Income Fund
Performance |
| Timeline |
NYSE Composite and Equity Income Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Equity Income Fund
Pair trading matchups for Equity Income
Pair Trading with NYSE Composite and Equity Income
The main advantage of trading using opposite NYSE Composite and Equity Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Equity Income 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 Equity Income will offset losses from the drop in Equity Income's long position.| NYSE Composite vs. Glacier Bancorp | NYSE Composite vs. LithiumBank Resources Corp | NYSE Composite vs. Stepstone Group | NYSE Composite vs. Pintec Technology Holdings |
| Equity Income vs. International Growth Fund | Equity Income vs. Growth Fund Investor | Equity Income vs. Equity Income Fund | Equity Income vs. Ultra Fund Investor |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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