Correlation Between NYSE Composite and FIRO
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and FIRO 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 FIRO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and FIRO, you can compare the effects of market volatilities on NYSE Composite and FIRO 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 FIRO. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and FIRO.
Diversification Opportunities for NYSE Composite and FIRO
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NYSE and FIRO is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and FIRO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIRO 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 FIRO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIRO has no effect on the direction of NYSE Composite i.e., NYSE Composite and FIRO go up and down completely randomly.
Pair Corralation between NYSE Composite and FIRO
Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.16 times more return on investment than FIRO. However, NYSE Composite is 6.32 times less risky than FIRO. It trades about 0.13 of its potential returns per unit of risk. FIRO is currently generating about -0.02 per unit of risk. If you would invest 1,626,375 in NYSE Composite on August 27, 2024 and sell it today you would earn a total of 385,970 from holding NYSE Composite or generate 23.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 54.44% |
| Values | Daily Returns |
NYSE Composite vs. FIRO
Performance |
| Timeline |
NYSE Composite and FIRO Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
FIRO
Pair trading matchups for FIRO
Pair Trading with NYSE Composite and FIRO
The main advantage of trading using opposite NYSE Composite and FIRO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, FIRO 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 FIRO will offset losses from the drop in FIRO's long position.| NYSE Composite vs. Hooker Furniture | NYSE Composite vs. Hudson Pacific Properties | NYSE Composite vs. Canlan Ice Sports | NYSE Composite vs. Boston Properties |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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