Correlation Between NYSE Composite and The Fairholme
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and The Fairholme 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 The Fairholme into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and The Fairholme Fund, you can compare the effects of market volatilities on NYSE Composite and The Fairholme 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 The Fairholme. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and The Fairholme.
Diversification Opportunities for NYSE Composite and The Fairholme
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NYSE and THE is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and The Fairholme Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Fairholme 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 The Fairholme. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Fairholme has no effect on the direction of NYSE Composite i.e., NYSE Composite and The Fairholme go up and down completely randomly.
Pair Corralation between NYSE Composite and The Fairholme
Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.49 times more return on investment than The Fairholme. However, NYSE Composite is 2.04 times less risky than The Fairholme. It trades about 0.11 of its potential returns per unit of risk. The Fairholme Fund is currently generating about -0.01 per unit of risk. If you would invest 1,663,938 in NYSE Composite on November 9, 2024 and sell it today you would earn a total of 351,820 from holding NYSE Composite or generate 21.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. The Fairholme Fund
Performance |
| Timeline |
NYSE Composite and The Fairholme Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
The Fairholme Fund
Pair trading matchups for The Fairholme
Pair Trading with NYSE Composite and The Fairholme
The main advantage of trading using opposite NYSE Composite and The Fairholme positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, The Fairholme 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 The Fairholme will offset losses from the drop in The Fairholme's long position.| NYSE Composite vs. Integrated Media Technology | NYSE Composite vs. Custom Truck One | NYSE Composite vs. Funko Inc | NYSE Composite vs. Multi Ways Holdings |
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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 Global Correlations module to find global opportunities by holding instruments from different markets.
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