Correlation Between NYSE Composite and First Business
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and First Business 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 First Business into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and First Business Financial, you can compare the effects of market volatilities on NYSE Composite and First Business 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 First Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and First Business.
Diversification Opportunities for NYSE Composite and First Business
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NYSE and First is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and First Business Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Business Financial 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 First Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Business Financial has no effect on the direction of NYSE Composite i.e., NYSE Composite and First Business go up and down completely randomly.
Pair Corralation between NYSE Composite and First Business
Assuming the 90 days trading horizon NYSE Composite is expected to generate 7.32 times less return on investment than First Business. But when comparing it to its historical volatility, NYSE Composite is 5.34 times less risky than First Business. It trades about 0.13 of its potential returns per unit of risk. First Business Financial is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 4,417 in First Business Financial on August 24, 2024 and sell it today you would earn a total of 608.00 from holding First Business Financial or generate 13.76% 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. First Business Financial
Performance |
| Timeline |
NYSE Composite and First Business Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
First Business Financial
Pair trading matchups for First Business
Pair Trading with NYSE Composite and First Business
The main advantage of trading using opposite NYSE Composite and First Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, First Business 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 First Business will offset losses from the drop in First Business' long position.| NYSE Composite vs. Awilco Drilling PLC | NYSE Composite vs. AKITA Drilling | NYSE Composite vs. SunOpta | NYSE Composite vs. Delek Drilling |
| First Business vs. Home Federal Bancorp | First Business vs. Lake Shore Bancorp | First Business vs. Old Point Financial | First Business vs. Parke Bancorp |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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