Correlation Between NYSE Composite and Hang Seng
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Hang Seng 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 Hang Seng into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Hang Seng Bank, you can compare the effects of market volatilities on NYSE Composite and Hang Seng 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 Hang Seng. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Hang Seng.
Diversification Opportunities for NYSE Composite and Hang Seng
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NYSE and Hang is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Hang Seng Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hang Seng Bank 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 Hang Seng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hang Seng Bank has no effect on the direction of NYSE Composite i.e., NYSE Composite and Hang Seng go up and down completely randomly.
Pair Corralation between NYSE Composite and Hang Seng
Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.43 times more return on investment than Hang Seng. However, NYSE Composite is 2.34 times less risky than Hang Seng. It trades about 0.24 of its potential returns per unit of risk. Hang Seng Bank is currently generating about -0.04 per unit of risk. If you would invest 1,954,967 in NYSE Composite on August 28, 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 | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Hang Seng Bank
Performance |
| Timeline |
NYSE Composite and Hang Seng Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Hang Seng Bank
Pair trading matchups for Hang Seng
Pair Trading with NYSE Composite and Hang Seng
The main advantage of trading using opposite NYSE Composite and Hang Seng positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Hang Seng 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 Hang Seng will offset losses from the drop in Hang Seng'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 |
| Hang Seng vs. Caixabank SA ADR | Hang Seng vs. Commercial International Bank | Hang Seng vs. PT Bank Rakyat | Hang Seng vs. Riverview Bancorp |
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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