Correlation Between NYSE Composite and IShares GNMA
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and IShares GNMA 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 IShares GNMA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and iShares GNMA Bond, you can compare the effects of market volatilities on NYSE Composite and IShares GNMA 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 IShares GNMA. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and IShares GNMA.
Diversification Opportunities for NYSE Composite and IShares GNMA
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between NYSE and IShares is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and iShares GNMA Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares GNMA Bond 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 IShares GNMA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares GNMA Bond has no effect on the direction of NYSE Composite i.e., NYSE Composite and IShares GNMA go up and down completely randomly.
Pair Corralation between NYSE Composite and IShares GNMA
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.62 times more return on investment than IShares GNMA. However, NYSE Composite is 1.62 times more volatile than iShares GNMA Bond. It trades about 0.17 of its potential returns per unit of risk. iShares GNMA Bond is currently generating about -0.04 per unit of risk. If you would invest 1,901,742 in NYSE Composite on September 2, 2024 and sell it today you would earn a total of 125,462 from holding NYSE Composite or generate 6.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. iShares GNMA Bond
Performance |
| Timeline |
NYSE Composite and IShares GNMA Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
iShares GNMA Bond
Pair trading matchups for IShares GNMA
Pair Trading with NYSE Composite and IShares GNMA
The main advantage of trading using opposite NYSE Composite and IShares GNMA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, IShares GNMA 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 IShares GNMA will offset losses from the drop in IShares GNMA's long position.| NYSE Composite vs. Simon Property Group | NYSE Composite vs. Merit Medical Systems | NYSE Composite vs. Catalent | NYSE Composite vs. Titan Machinery |
| IShares GNMA vs. iShares Agency Bond | IShares GNMA vs. iShares 1 3 Year | IShares GNMA vs. iShares Core 1 5 | IShares GNMA vs. iShares Core 10 |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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