Correlation Between NYSE Composite and SPDR SP
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and SPDR SP 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 SPDR SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and SPDR SP Global, you can compare the effects of market volatilities on NYSE Composite and SPDR SP 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 SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and SPDR SP.
Diversification Opportunities for NYSE Composite and SPDR SP
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NYSE and SPDR is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and SPDR SP Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Global 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 SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Global has no effect on the direction of NYSE Composite i.e., NYSE Composite and SPDR SP go up and down completely randomly.
Pair Corralation between NYSE Composite and SPDR SP
Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.9 times more return on investment than SPDR SP. However, NYSE Composite is 1.12 times less risky than SPDR SP. It trades about 0.08 of its potential returns per unit of risk. SPDR SP Global is currently generating about 0.06 per unit of risk. If you would invest 1,542,897 in NYSE Composite on November 19, 2024 and sell it today you would earn a total of 470,152 from holding NYSE Composite or generate 30.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
NYSE Composite vs. SPDR SP Global
Performance |
| Timeline |
NYSE Composite and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
SPDR SP Global
Pair trading matchups for SPDR SP
Pair Trading with NYSE Composite and SPDR SP
The main advantage of trading using opposite NYSE Composite and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, SPDR SP 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 SPDR SP will offset losses from the drop in SPDR SP's long position.| NYSE Composite vs. Regeneron Pharmaceuticals | NYSE Composite vs. Compania Cervecerias Unidas | NYSE Composite vs. Ambev SA ADR | NYSE Composite vs. Monster Beverage Corp |
| SPDR SP vs. iShares Dividend and | SPDR SP vs. Martin Currie Sustainable | SPDR SP vs. VictoryShares THB Mid | SPDR SP vs. Mast Global Battery |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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