Correlation Between NYSE Composite and ETF Series
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and ETF Series 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 ETF Series into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and ETF Series Solutions, you can compare the effects of market volatilities on NYSE Composite and ETF Series 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 ETF Series. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and ETF Series.
Diversification Opportunities for NYSE Composite and ETF Series
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between NYSE and ETF is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and ETF Series Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETF Series Solutions 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 ETF Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETF Series Solutions has no effect on the direction of NYSE Composite i.e., NYSE Composite and ETF Series go up and down completely randomly.
Pair Corralation between NYSE Composite and ETF Series
Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.75 times more return on investment than ETF Series. However, NYSE Composite is 1.33 times less risky than ETF Series. It trades about 0.41 of its potential returns per unit of risk. ETF Series Solutions is currently generating about -0.02 per unit of risk. If you would invest 1,925,354 in NYSE Composite on September 2, 2024 and sell it today you would earn a total of 101,850 from holding NYSE Composite or generate 5.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. ETF Series Solutions
Performance |
| Timeline |
NYSE Composite and ETF Series Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
ETF Series Solutions
Pair trading matchups for ETF Series
Pair Trading with NYSE Composite and ETF Series
The main advantage of trading using opposite NYSE Composite and ETF Series positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, ETF Series 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 ETF Series will offset losses from the drop in ETF Series' long position.| NYSE Composite vs. Simon Property Group | NYSE Composite vs. Merit Medical Systems | NYSE Composite vs. Catalent | NYSE Composite vs. Titan Machinery |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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