Correlation Between NYSE Composite and IShares SP
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and IShares SP 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 SP 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 SP Small Cap, you can compare the effects of market volatilities on NYSE Composite and IShares SP 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 SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and IShares SP.
Diversification Opportunities for NYSE Composite and IShares SP
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NYSE and IShares is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and iShares SP Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SP Small 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 SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SP Small has no effect on the direction of NYSE Composite i.e., NYSE Composite and IShares SP go up and down completely randomly.
Pair Corralation between NYSE Composite and IShares SP
Assuming the 90 days trading horizon NYSE Composite is expected to generate 2.67 times less return on investment than IShares SP. But when comparing it to its historical volatility, NYSE Composite is 2.5 times less risky than IShares SP. It trades about 0.24 of its potential returns per unit of risk. iShares SP Small Cap is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 13,793 in iShares SP Small Cap on August 28, 2024 and sell it today you would earn a total of 1,272 from holding iShares SP Small Cap or generate 9.22% 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 SP Small Cap
Performance |
| Timeline |
NYSE Composite and IShares SP Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
iShares SP Small Cap
Pair trading matchups for IShares SP
Pair Trading with NYSE Composite and IShares SP
The main advantage of trading using opposite NYSE Composite and IShares SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, IShares SP 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 SP will offset losses from the drop in IShares SP'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 |
| IShares SP vs. Invesco DWA Momentum | IShares SP vs. Invesco DWA Developed | IShares SP vs. Invesco DWA Emerging | IShares SP vs. First Trust Small |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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