Correlation Between NYSE Composite and Federal Home
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Federal Home 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 Federal Home into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Federal Home Loan, you can compare the effects of market volatilities on NYSE Composite and Federal Home 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 Federal Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Federal Home.
Diversification Opportunities for NYSE Composite and Federal Home
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NYSE and Federal is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Federal Home Loan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Home Loan 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 Federal Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Home Loan has no effect on the direction of NYSE Composite i.e., NYSE Composite and Federal Home go up and down completely randomly.
Pair Corralation between NYSE Composite and Federal Home
Assuming the 90 days trading horizon NYSE Composite is expected to generate 19.31 times less return on investment than Federal Home. But when comparing it to its historical volatility, NYSE Composite is 26.73 times less risky than Federal Home. It trades about 0.42 of its potential returns per unit of risk. Federal Home Loan is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 681.00 in Federal Home Loan on September 1, 2024 and sell it today you would earn a total of 869.00 from holding Federal Home Loan or generate 127.61% 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. Federal Home Loan
Performance |
| Timeline |
NYSE Composite and Federal Home Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Federal Home Loan
Pair trading matchups for Federal Home
Pair Trading with NYSE Composite and Federal Home
The main advantage of trading using opposite NYSE Composite and Federal Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Federal Home 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 Federal Home will offset losses from the drop in Federal Home's long position.| NYSE Composite vs. Acumen Pharmaceuticals | NYSE Composite vs. Mind Medicine | NYSE Composite vs. NL Industries | NYSE Composite vs. Ecovyst |
| Federal Home vs. Federal Home Loan | Federal Home vs. Federal Home Loan | Federal Home vs. Federal Home Loan | Federal Home vs. Federal Home Loan |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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