Correlation Between NYSE Composite and Small Company
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Small Company 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 Small Company into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Small Pany Fund, you can compare the effects of market volatilities on NYSE Composite and Small Company 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 Small Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Small Company.
Diversification Opportunities for NYSE Composite and Small Company
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between NYSE and Small is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Small Pany Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Pany Fund 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 Small Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Pany Fund has no effect on the direction of NYSE Composite i.e., NYSE Composite and Small Company go up and down completely randomly.
Pair Corralation between NYSE Composite and Small Company
Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.62 times more return on investment than Small Company. However, NYSE Composite is 1.61 times less risky than Small Company. It trades about 0.08 of its potential returns per unit of risk. Small Pany Fund is currently generating about 0.05 per unit of risk. If you would invest 1,582,860 in NYSE Composite on September 1, 2024 and sell it today you would earn a total of 444,344 from holding NYSE Composite or generate 28.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.78% |
| Values | Daily Returns |
NYSE Composite vs. Small Pany Fund
Performance |
| Timeline |
NYSE Composite and Small Company Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Small Pany Fund
Pair trading matchups for Small Company
Pair Trading with NYSE Composite and Small Company
The main advantage of trading using opposite NYSE Composite and Small Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Small Company 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 Small Company will offset losses from the drop in Small Company's long position.| NYSE Composite vs. Acumen Pharmaceuticals | NYSE Composite vs. Mind Medicine | NYSE Composite vs. NL Industries | NYSE Composite vs. Ecovyst |
| Small Company vs. International Fund International | Small Company vs. Parnassus Mid Cap | Small Company vs. Balanced Fund Institutional | Small Company vs. Short Intermediate Bond Fund |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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