Correlation Between NYSE Composite and Capital Management
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Capital Management 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 Capital Management into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Capital Management Mid Cap, you can compare the effects of market volatilities on NYSE Composite and Capital Management 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 Capital Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Capital Management.
Diversification Opportunities for NYSE Composite and Capital Management
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between NYSE and Capital is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Capital Management Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Management Mid 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 Capital Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Management Mid has no effect on the direction of NYSE Composite i.e., NYSE Composite and Capital Management go up and down completely randomly.
Pair Corralation between NYSE Composite and Capital Management
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.77 times less return on investment than Capital Management. But when comparing it to its historical volatility, NYSE Composite is 1.92 times less risky than Capital Management. It trades about 0.38 of its potential returns per unit of risk. Capital Management Mid Cap is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 2,815 in Capital Management Mid Cap on September 4, 2024 and sell it today you would earn a total of 254.00 from holding Capital Management Mid Cap or generate 9.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Capital Management Mid Cap
Performance |
| Timeline |
NYSE Composite and Capital Management Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Capital Management Mid Cap
Pair trading matchups for Capital Management
Pair Trading with NYSE Composite and Capital Management
The main advantage of trading using opposite NYSE Composite and Capital Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Capital Management 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 Capital Management will offset losses from the drop in Capital Management's long position.| NYSE Composite vs. Kite Realty Group | NYSE Composite vs. Tradeweb Markets | NYSE Composite vs. Meiwu Technology Co | NYSE Composite vs. Uber Technologies |
| Capital Management vs. Calvert Developed Market | Capital Management vs. Calvert Developed Market | Capital Management vs. Calvert Short Duration | Capital Management vs. Calvert International Responsible |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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