Correlation Between NYSE Composite and ETRACS Alerian
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and ETRACS Alerian 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 ETRACS Alerian into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and ETRACS Alerian Midstream, you can compare the effects of market volatilities on NYSE Composite and ETRACS Alerian 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 ETRACS Alerian. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and ETRACS Alerian.
Diversification Opportunities for NYSE Composite and ETRACS Alerian
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NYSE and ETRACS is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and ETRACS Alerian Midstream in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETRACS Alerian Midstream 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 ETRACS Alerian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETRACS Alerian Midstream has no effect on the direction of NYSE Composite i.e., NYSE Composite and ETRACS Alerian go up and down completely randomly.
Pair Corralation between NYSE Composite and ETRACS Alerian
Assuming the 90 days trading horizon NYSE Composite is expected to generate 2.59 times less return on investment than ETRACS Alerian. But when comparing it to its historical volatility, NYSE Composite is 1.23 times less risky than ETRACS Alerian. It trades about 0.14 of its potential returns per unit of risk. ETRACS Alerian Midstream is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 4,136 in ETRACS Alerian Midstream on September 1, 2024 and sell it today you would earn a total of 1,516 from holding ETRACS Alerian Midstream or generate 36.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
NYSE Composite vs. ETRACS Alerian Midstream
Performance |
| Timeline |
NYSE Composite and ETRACS Alerian Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
ETRACS Alerian Midstream
Pair trading matchups for ETRACS Alerian
Pair Trading with NYSE Composite and ETRACS Alerian
The main advantage of trading using opposite NYSE Composite and ETRACS Alerian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, ETRACS Alerian 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 ETRACS Alerian will offset losses from the drop in ETRACS Alerian's long position.| NYSE Composite vs. Acumen Pharmaceuticals | NYSE Composite vs. Mind Medicine | NYSE Composite vs. NL Industries | NYSE Composite vs. Ecovyst |
| ETRACS Alerian vs. First Trust North | ETRACS Alerian vs. Global X MLP | ETRACS Alerian vs. Tortoise North American | ETRACS Alerian vs. UBS AG London |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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