Correlation Between NYSE Composite and F5 Networks
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and F5 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 F5 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 F5 Networks, you can compare the effects of market volatilities on NYSE Composite and F5 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 F5 Networks. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and F5 Networks.
Diversification Opportunities for NYSE Composite and F5 Networks
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NYSE and FFIV is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and F5 Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on F5 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 F5 Networks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of F5 Networks has no effect on the direction of NYSE Composite i.e., NYSE Composite and F5 Networks go up and down completely randomly.
Pair Corralation between NYSE Composite and F5 Networks
Assuming the 90 days trading horizon NYSE Composite is expected to generate 4.4 times less return on investment than F5 Networks. But when comparing it to its historical volatility, NYSE Composite is 3.67 times less risky than F5 Networks. It trades about 0.21 of its potential returns per unit of risk. F5 Networks is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 21,836 in F5 Networks on August 27, 2024 and sell it today you would earn a total of 2,862 from holding F5 Networks or generate 13.11% 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. F5 Networks
Performance |
| Timeline |
NYSE Composite and F5 Networks Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
F5 Networks
Pair trading matchups for F5 Networks
Pair Trading with NYSE Composite and F5 Networks
The main advantage of trading using opposite NYSE Composite and F5 Networks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, F5 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 F5 Networks will offset losses from the drop in F5 Networks' long position.| NYSE Composite vs. Grocery Outlet Holding | NYSE Composite vs. Tencent Music Entertainment | NYSE Composite vs. SunLink Health Systems | NYSE Composite vs. Getty Realty |
| F5 Networks vs. VeriSign | F5 Networks vs. Check Point Software | F5 Networks vs. Qualys Inc | F5 Networks vs. CyberArk Software |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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