Correlation Between NYSE Composite and T Rex
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and T Rex 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 T Rex into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and T Rex 2X Inverse, you can compare the effects of market volatilities on NYSE Composite and T Rex 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 T Rex. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and T Rex.
Diversification Opportunities for NYSE Composite and T Rex
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between NYSE and ETQ is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and T Rex 2X Inverse in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T Rex 2X 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 T Rex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T Rex 2X has no effect on the direction of NYSE Composite i.e., NYSE Composite and T Rex go up and down completely randomly.
Pair Corralation between NYSE Composite and T Rex
Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.05 times more return on investment than T Rex. However, NYSE Composite is 19.98 times less risky than T Rex. It trades about -0.07 of its potential returns per unit of risk. T Rex 2X Inverse is currently generating about -0.16 per unit of risk. If you would invest 2,001,587 in NYSE Composite on September 12, 2024 and sell it today you would lose (13,397) from holding NYSE Composite or give up 0.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
NYSE Composite vs. T Rex 2X Inverse
Performance |
| Timeline |
NYSE Composite and T Rex Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
T Rex 2X Inverse
Pair trading matchups for T Rex
Pair Trading with NYSE Composite and T Rex
The main advantage of trading using opposite NYSE Composite and T Rex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, T Rex 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 T Rex will offset losses from the drop in T Rex's long position.| NYSE Composite vs. Teleflex Incorporated | NYSE Composite vs. Victorias Secret Co | NYSE Composite vs. Under Armour C | NYSE Composite vs. Steven Madden |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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