Correlation Between NYSE Composite and IShares JP
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and IShares JP 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 JP 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 JP Morgan, you can compare the effects of market volatilities on NYSE Composite and IShares JP 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 JP. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and IShares JP.
Diversification Opportunities for NYSE Composite and IShares JP
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NYSE and IShares is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and iShares JP Morgan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares JP Morgan 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 JP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares JP Morgan has no effect on the direction of NYSE Composite i.e., NYSE Composite and IShares JP go up and down completely randomly.
Pair Corralation between NYSE Composite and IShares JP
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.54 times more return on investment than IShares JP. However, NYSE Composite is 1.54 times more volatile than iShares JP Morgan. It trades about 0.08 of its potential returns per unit of risk. iShares JP Morgan is currently generating about 0.1 per unit of risk. If you would invest 1,531,179 in NYSE Composite on August 28, 2024 and sell it today you would earn a total of 490,857 from holding NYSE Composite or generate 32.06% 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. iShares JP Morgan
Performance |
| Timeline |
NYSE Composite and IShares JP Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
iShares JP Morgan
Pair trading matchups for IShares JP
Pair Trading with NYSE Composite and IShares JP
The main advantage of trading using opposite NYSE Composite and IShares JP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, IShares JP 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 JP will offset losses from the drop in IShares JP's long position.| NYSE Composite vs. Hooker Furniture | NYSE Composite vs. Hudson Pacific Properties | NYSE Composite vs. Canlan Ice Sports | NYSE Composite vs. Boston Properties |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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