Correlation Between NYSE Composite and Free Market
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Free Market 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 Free Market into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Free Market Equity, you can compare the effects of market volatilities on NYSE Composite and Free Market 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 Free Market. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Free Market.
Diversification Opportunities for NYSE Composite and Free Market
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between NYSE and Free is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Free Market Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Free Market Equity 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 Free Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Free Market Equity has no effect on the direction of NYSE Composite i.e., NYSE Composite and Free Market go up and down completely randomly.
Pair Corralation between NYSE Composite and Free Market
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.2 times less return on investment than Free Market. But when comparing it to its historical volatility, NYSE Composite is 1.36 times less risky than Free Market. It trades about 0.08 of its potential returns per unit of risk. Free Market Equity is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,940 in Free Market Equity on September 2, 2024 and sell it today you would earn a total of 721.00 from holding Free Market Equity or generate 37.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Free Market Equity
Performance |
| Timeline |
NYSE Composite and Free Market Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Free Market Equity
Pair trading matchups for Free Market
Pair Trading with NYSE Composite and Free Market
The main advantage of trading using opposite NYSE Composite and Free Market positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Free Market 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 Free Market will offset losses from the drop in Free Market's long position.| NYSE Composite vs. Simon Property Group | NYSE Composite vs. Merit Medical Systems | NYSE Composite vs. Catalent | NYSE Composite vs. Titan Machinery |
| Free Market vs. Artisan Emerging Markets | Free Market vs. Origin Emerging Markets | Free Market vs. Transamerica Emerging Markets | Free Market vs. Ashmore Emerging Markets |
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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