Correlation Between NYSE Composite and IShares California
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and IShares California 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 IShares California into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and iShares California Muni, you can compare the effects of market volatilities on NYSE Composite and IShares California 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 IShares California. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and IShares California.
Diversification Opportunities for NYSE Composite and IShares California
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between NYSE and IShares is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and iShares California Muni in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares California Muni 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 IShares California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares California Muni has no effect on the direction of NYSE Composite i.e., NYSE Composite and IShares California go up and down completely randomly.
Pair Corralation between NYSE Composite and IShares California
Assuming the 90 days trading horizon NYSE Composite is expected to generate 2.71 times more return on investment than IShares California. However, NYSE Composite is 2.71 times more volatile than iShares California Muni. It trades about 0.15 of its potential returns per unit of risk. iShares California Muni is currently generating about 0.12 per unit of risk. If you would invest 1,785,236 in NYSE Composite on August 28, 2024 and sell it today you would earn a total of 236,800 from holding NYSE Composite or generate 13.26% 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. iShares California Muni
Performance |
| Timeline |
NYSE Composite and IShares California Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
iShares California Muni
Pair trading matchups for IShares California
Pair Trading with NYSE Composite and IShares California
The main advantage of trading using opposite NYSE Composite and IShares California positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, IShares California 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 IShares California will offset losses from the drop in IShares California's long position.| NYSE Composite vs. Vita Coco | NYSE Composite vs. Franklin Wireless Corp | NYSE Composite vs. Ambev SA ADR | NYSE Composite vs. Toro Co |
| IShares California vs. Invesco New York | IShares California vs. Invesco VRDO Tax Free | IShares California vs. Invesco National AMT Free |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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