Correlation Between NYSE Composite and Emerging Markets
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Emerging Markets 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 Emerging Markets into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Emerging Markets Value, you can compare the effects of market volatilities on NYSE Composite and Emerging Markets 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 Emerging Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Emerging Markets.
Diversification Opportunities for NYSE Composite and Emerging Markets
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between NYSE and Emerging is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Emerging Markets Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets Value 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 Emerging Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerging Markets Value has no effect on the direction of NYSE Composite i.e., NYSE Composite and Emerging Markets go up and down completely randomly.
Pair Corralation between NYSE Composite and Emerging Markets
Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.71 times more return on investment than Emerging Markets. However, NYSE Composite is 1.41 times less risky than Emerging Markets. It trades about 0.14 of its potential returns per unit of risk. Emerging Markets Value is currently generating about -0.16 per unit of risk. If you would invest 1,951,644 in NYSE Composite on August 29, 2024 and sell it today you would earn a total of 70,301 from holding NYSE Composite or generate 3.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Emerging Markets Value
Performance |
| Timeline |
NYSE Composite and Emerging Markets Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Emerging Markets Value
Pair trading matchups for Emerging Markets
Pair Trading with NYSE Composite and Emerging Markets
The main advantage of trading using opposite NYSE Composite and Emerging Markets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Emerging Markets 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 Emerging Markets will offset losses from the drop in Emerging Markets' long position.| NYSE Composite vs. Sphere Entertainment Co | NYSE Composite vs. Weibo Corp | NYSE Composite vs. BCE Inc | NYSE Composite vs. Pinterest |
| Emerging Markets vs. Dfa International Small | Emerging Markets vs. International Small Pany | Emerging Markets vs. Emerging Markets Small | Emerging Markets vs. Dfa International Value |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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