Correlation Between NYSE Composite and Core Bond
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Core Bond 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 Core Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Core Bond Series, you can compare the effects of market volatilities on NYSE Composite and Core Bond 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 Core Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Core Bond.
Diversification Opportunities for NYSE Composite and Core Bond
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between NYSE and Core is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Core Bond Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Core Bond Series 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 Core Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Core Bond Series has no effect on the direction of NYSE Composite i.e., NYSE Composite and Core Bond go up and down completely randomly.
Pair Corralation between NYSE Composite and Core Bond
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.61 times more return on investment than Core Bond. However, NYSE Composite is 1.61 times more volatile than Core Bond Series. It trades about 0.41 of its potential returns per unit of risk. Core Bond Series is currently generating about 0.14 per unit of risk. If you would invest 1,925,354 in NYSE Composite on September 2, 2024 and sell it today you would earn a total of 101,850 from holding NYSE Composite or generate 5.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Core Bond Series
Performance |
| Timeline |
NYSE Composite and Core Bond Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Core Bond Series
Pair trading matchups for Core Bond
Pair Trading with NYSE Composite and Core Bond
The main advantage of trading using opposite NYSE Composite and Core Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Core Bond 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 Core Bond will offset losses from the drop in Core Bond's long position.| NYSE Composite vs. Simon Property Group | NYSE Composite vs. Merit Medical Systems | NYSE Composite vs. Catalent | NYSE Composite vs. Titan Machinery |
| Core Bond vs. John Hancock Financial | Core Bond vs. Mesirow Financial Small | Core Bond vs. Prudential Jennison Financial | Core Bond vs. Gabelli Global Financial |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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