Correlation Between NYSE Composite and Extreme Networks
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Extreme Networks 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 Extreme Networks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Extreme Networks, you can compare the effects of market volatilities on NYSE Composite and Extreme Networks 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 Extreme Networks. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Extreme Networks.
Diversification Opportunities for NYSE Composite and Extreme Networks
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NYSE and Extreme is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Extreme Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Extreme Networks 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 Extreme Networks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Extreme Networks has no effect on the direction of NYSE Composite i.e., NYSE Composite and Extreme Networks go up and down completely randomly.
Pair Corralation between NYSE Composite and Extreme Networks
Assuming the 90 days trading horizon NYSE Composite is expected to generate 2.75 times less return on investment than Extreme Networks. But when comparing it to its historical volatility, NYSE Composite is 4.67 times less risky than Extreme Networks. It trades about 0.15 of its potential returns per unit of risk. Extreme Networks is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,510 in Extreme Networks on August 28, 2024 and sell it today you would earn a total of 139.00 from holding Extreme Networks or generate 9.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.67% |
| Values | Daily Returns |
NYSE Composite vs. Extreme Networks
Performance |
| Timeline |
NYSE Composite and Extreme Networks Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Extreme Networks
Pair trading matchups for Extreme Networks
Pair Trading with NYSE Composite and Extreme Networks
The main advantage of trading using opposite NYSE Composite and Extreme Networks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Extreme Networks 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 Extreme Networks will offset losses from the drop in Extreme Networks' long position.| NYSE Composite vs. Vita Coco | NYSE Composite vs. Franklin Wireless Corp | NYSE Composite vs. Ambev SA ADR | NYSE Composite vs. Toro Co |
| Extreme Networks vs. Ichor Holdings | Extreme Networks vs. Fabrinet | Extreme Networks vs. Hello Group | Extreme Networks vs. Ultra Clean Holdings |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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