Correlation Between NYSE Composite and Financial
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Financial 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 Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Financial 15 Split, you can compare the effects of market volatilities on NYSE Composite and Financial 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 Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Financial.
Diversification Opportunities for NYSE Composite and Financial
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NYSE and Financial is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Financial 15 Split in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial 15 Split 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 Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial 15 Split has no effect on the direction of NYSE Composite i.e., NYSE Composite and Financial go up and down completely randomly.
Pair Corralation between NYSE Composite and Financial
Assuming the 90 days trading horizon NYSE Composite is expected to generate 2.54 times less return on investment than Financial. But when comparing it to its historical volatility, NYSE Composite is 1.89 times less risky than Financial. It trades about 0.42 of its potential returns per unit of risk. Financial 15 Split is currently generating about 0.56 of returns per unit of risk over similar time horizon. If you would invest 646.00 in Financial 15 Split on September 1, 2024 and sell it today you would earn a total of 82.00 from holding Financial 15 Split or generate 12.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 90.48% |
| Values | Daily Returns |
NYSE Composite vs. Financial 15 Split
Performance |
| Timeline |
NYSE Composite and Financial Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Financial 15 Split
Pair trading matchups for Financial
Pair Trading with NYSE Composite and Financial
The main advantage of trading using opposite NYSE Composite and Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Financial 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 Financial will offset losses from the drop in Financial's long position.| NYSE Composite vs. Acumen Pharmaceuticals | NYSE Composite vs. Mind Medicine | NYSE Composite vs. NL Industries | NYSE Composite vs. Ecovyst |
| Financial vs. SEI Investments | Financial vs. Oxford Lane Capital | Financial vs. Blackstone Group | Financial vs. North American Financial |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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