Correlation Between NYSE Composite and Foreign Trade
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Foreign Trade 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 Foreign Trade into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Foreign Trade Bank, you can compare the effects of market volatilities on NYSE Composite and Foreign Trade 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 Foreign Trade. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Foreign Trade.
Diversification Opportunities for NYSE Composite and Foreign Trade
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between NYSE and Foreign is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Foreign Trade Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foreign Trade Bank 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 Foreign Trade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foreign Trade Bank has no effect on the direction of NYSE Composite i.e., NYSE Composite and Foreign Trade go up and down completely randomly.
Pair Corralation between NYSE Composite and Foreign Trade
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.34 times less return on investment than Foreign Trade. But when comparing it to its historical volatility, NYSE Composite is 2.12 times less risky than Foreign Trade. It trades about 0.33 of its potential returns per unit of risk. Foreign Trade Bank is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 3,556 in Foreign Trade Bank on November 3, 2024 and sell it today you would earn a total of 222.00 from holding Foreign Trade Bank or generate 6.24% 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. Foreign Trade Bank
Performance |
| Timeline |
NYSE Composite and Foreign Trade Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Foreign Trade Bank
Pair trading matchups for Foreign Trade
Pair Trading with NYSE Composite and Foreign Trade
The main advantage of trading using opposite NYSE Composite and Foreign Trade positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Foreign Trade 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 Foreign Trade will offset losses from the drop in Foreign Trade's long position.| NYSE Composite vs. Palomar Holdings | NYSE Composite vs. The Peoples Insurance | NYSE Composite vs. Radian Group | NYSE Composite vs. Nascent Wine |
| Foreign Trade vs. Banco Santander Chile | Foreign Trade vs. Bancolombia SA ADR | Foreign Trade vs. Banco Bradesco SA | Foreign Trade vs. Credicorp |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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