Correlation Between NYSE Composite and Home Federal
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Home Federal 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 Home Federal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Home Federal Bancorp, you can compare the effects of market volatilities on NYSE Composite and Home Federal 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 Home Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Home Federal.
Diversification Opportunities for NYSE Composite and Home Federal
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between NYSE and Home is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Home Federal Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Federal 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 Home Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Federal Bancorp has no effect on the direction of NYSE Composite i.e., NYSE Composite and Home Federal go up and down completely randomly.
Pair Corralation between NYSE Composite and Home Federal
Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.26 times more return on investment than Home Federal. However, NYSE Composite is 3.81 times less risky than Home Federal. It trades about 0.24 of its potential returns per unit of risk. Home Federal Bancorp is currently generating about -0.03 per unit of risk. If you would invest 1,954,967 in NYSE Composite on August 27, 2024 and sell it today you would earn a total of 67,069 from holding NYSE Composite or generate 3.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 90.48% |
| Values | Daily Returns |
NYSE Composite vs. Home Federal Bancorp
Performance |
| Timeline |
NYSE Composite and Home Federal Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Home Federal Bancorp
Pair trading matchups for Home Federal
Pair Trading with NYSE Composite and Home Federal
The main advantage of trading using opposite NYSE Composite and Home Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Home Federal 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 Home Federal will offset losses from the drop in Home Federal's long position.| NYSE Composite vs. Hooker Furniture | NYSE Composite vs. Hudson Pacific Properties | NYSE Composite vs. Canlan Ice Sports | NYSE Composite vs. Boston Properties |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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