Correlation Between NYSE Composite and Kensington Defender
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Kensington Defender 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 Kensington Defender into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Kensington Defender Institutional, you can compare the effects of market volatilities on NYSE Composite and Kensington Defender 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 Kensington Defender. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Kensington Defender.
Diversification Opportunities for NYSE Composite and Kensington Defender
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NYSE and Kensington is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Kensington Defender Institutio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kensington Defender 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 Kensington Defender. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kensington Defender has no effect on the direction of NYSE Composite i.e., NYSE Composite and Kensington Defender go up and down completely randomly.
Pair Corralation between NYSE Composite and Kensington Defender
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.1 times more return on investment than Kensington Defender. However, NYSE Composite is 1.1 times more volatile than Kensington Defender Institutional. It trades about 0.11 of its potential returns per unit of risk. Kensington Defender Institutional is currently generating about 0.06 per unit of risk. If you would invest 1,594,944 in NYSE Composite on September 3, 2024 and sell it today you would earn a total of 426,378 from holding NYSE Composite or generate 26.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Kensington Defender Institutio
Performance |
| Timeline |
NYSE Composite and Kensington Defender Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Kensington Defender Institutional
Pair trading matchups for Kensington Defender
Pair Trading with NYSE Composite and Kensington Defender
The main advantage of trading using opposite NYSE Composite and Kensington Defender positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Kensington Defender 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 Kensington Defender will offset losses from the drop in Kensington Defender's long position.| NYSE Composite vs. Lindblad Expeditions Holdings | NYSE Composite vs. LB Foster | NYSE Composite vs. HUTCHMED DRC | NYSE Composite vs. Bridgford Foods |
| Kensington Defender vs. Us Government Securities | Kensington Defender vs. Blackrock Government Bond | Kensington Defender vs. Us Government Securities | Kensington Defender vs. Prudential Government Income |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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