Correlation Between NYSE Composite and Commercial Metals
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Commercial Metals 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 Commercial Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Commercial Metals, you can compare the effects of market volatilities on NYSE Composite and Commercial Metals 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 Commercial Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Commercial Metals.
Diversification Opportunities for NYSE Composite and Commercial Metals
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NYSE and Commercial is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Commercial Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commercial Metals 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 Commercial Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commercial Metals has no effect on the direction of NYSE Composite i.e., NYSE Composite and Commercial Metals go up and down completely randomly.
Pair Corralation between NYSE Composite and Commercial Metals
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.17 times less return on investment than Commercial Metals. But when comparing it to its historical volatility, NYSE Composite is 3.21 times less risky than Commercial Metals. It trades about 0.12 of its potential returns per unit of risk. Commercial Metals is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 5,505 in Commercial Metals on August 24, 2024 and sell it today you would earn a total of 539.00 from holding Commercial Metals or generate 9.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Commercial Metals
Performance |
| Timeline |
NYSE Composite and Commercial Metals Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Commercial Metals
Pair trading matchups for Commercial Metals
Pair Trading with NYSE Composite and Commercial Metals
The main advantage of trading using opposite NYSE Composite and Commercial Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Commercial Metals 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 Commercial Metals will offset losses from the drop in Commercial Metals' long position.| NYSE Composite vs. Akanda Corp | NYSE Composite vs. Valneva SE ADR | NYSE Composite vs. Radcom | NYSE Composite vs. Western Digital |
| Commercial Metals vs. Olympic Steel | Commercial Metals vs. Steel Dynamics | Commercial Metals vs. Nucor Corp | Commercial Metals vs. Universal Stainless Alloy |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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