Correlation Between NYSE Composite and IShares Regional
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and IShares Regional 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 Regional 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 Regional Banks, you can compare the effects of market volatilities on NYSE Composite and IShares Regional 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 Regional. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and IShares Regional.
Diversification Opportunities for NYSE Composite and IShares Regional
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NYSE and IShares is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and iShares Regional Banks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Regional Banks 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 Regional. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Regional Banks has no effect on the direction of NYSE Composite i.e., NYSE Composite and IShares Regional go up and down completely randomly.
Pair Corralation between NYSE Composite and IShares Regional
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.36 times less return on investment than IShares Regional. But when comparing it to its historical volatility, NYSE Composite is 1.95 times less risky than IShares Regional. It trades about 0.28 of its potential returns per unit of risk. iShares Regional Banks is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 5,085 in iShares Regional Banks on November 4, 2024 and sell it today you would earn a total of 263.00 from holding iShares Regional Banks or generate 5.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. iShares Regional Banks
Performance |
| Timeline |
NYSE Composite and IShares Regional Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
iShares Regional Banks
Pair trading matchups for IShares Regional
Pair Trading with NYSE Composite and IShares Regional
The main advantage of trading using opposite NYSE Composite and IShares Regional positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, IShares Regional 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 Regional will offset losses from the drop in IShares Regional's long position.| NYSE Composite vs. Arrow Electronics | NYSE Composite vs. Cirmaker Technology | NYSE Composite vs. Zhihu Inc ADR | NYSE Composite vs. Weibo Corp |
| IShares Regional vs. iShares Broker Dealers Securities | IShares Regional vs. iShares Insurance ETF | IShares Regional vs. iShares Financial Services | IShares Regional vs. iShares Financials ETF |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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