Correlation Between NYSE Composite and Five Star
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Five Star 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 Five Star into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Five Star Bancorp, you can compare the effects of market volatilities on NYSE Composite and Five Star 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 Five Star. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Five Star.
Diversification Opportunities for NYSE Composite and Five Star
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NYSE and Five is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Five Star Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Five Star Bancorp 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 Five Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Five Star Bancorp has no effect on the direction of NYSE Composite i.e., NYSE Composite and Five Star go up and down completely randomly.
Pair Corralation between NYSE Composite and Five Star
Assuming the 90 days trading horizon NYSE Composite is expected to generate 3.03 times less return on investment than Five Star. But when comparing it to its historical volatility, NYSE Composite is 4.32 times less risky than Five Star. It trades about 0.24 of its potential returns per unit of risk. Five Star Bancorp is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 3,029 in Five Star Bancorp on August 29, 2024 and sell it today you would earn a total of 303.00 from holding Five Star Bancorp or generate 10.0% 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. Five Star Bancorp
Performance |
| Timeline |
NYSE Composite and Five Star Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Five Star Bancorp
Pair trading matchups for Five Star
Pair Trading with NYSE Composite and Five Star
The main advantage of trading using opposite NYSE Composite and Five Star positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Five Star 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 Five Star will offset losses from the drop in Five Star's long position.| NYSE Composite vs. Vita Coco | NYSE Composite vs. Franklin Wireless Corp | NYSE Composite vs. Ambev SA ADR | NYSE Composite vs. Toro Co |
| Five Star vs. Fifth Third Bancorp | Five Star vs. Huntington Bancshares Incorporated | Five Star vs. MT Bank |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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