Correlation Between NYSE Composite and Johnson Municipal
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Johnson Municipal 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 Johnson Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Johnson Municipal Income, you can compare the effects of market volatilities on NYSE Composite and Johnson Municipal 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 Johnson Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Johnson Municipal.
Diversification Opportunities for NYSE Composite and Johnson Municipal
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between NYSE and Johnson is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Johnson Municipal Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Municipal Income 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 Johnson Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Municipal Income has no effect on the direction of NYSE Composite i.e., NYSE Composite and Johnson Municipal go up and down completely randomly.
Pair Corralation between NYSE Composite and Johnson Municipal
Assuming the 90 days trading horizon NYSE Composite is expected to generate 2.97 times more return on investment than Johnson Municipal. However, NYSE Composite is 2.97 times more volatile than Johnson Municipal Income. It trades about 0.09 of its potential returns per unit of risk. Johnson Municipal Income is currently generating about 0.07 per unit of risk. If you would invest 1,626,371 in NYSE Composite on September 12, 2024 and sell it today you would earn a total of 361,819 from holding NYSE Composite or generate 22.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Johnson Municipal Income
Performance |
| Timeline |
NYSE Composite and Johnson Municipal Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Johnson Municipal Income
Pair trading matchups for Johnson Municipal
Pair Trading with NYSE Composite and Johnson Municipal
The main advantage of trading using opposite NYSE Composite and Johnson Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Johnson Municipal 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 Johnson Municipal will offset losses from the drop in Johnson Municipal's long position.| NYSE Composite vs. Teleflex Incorporated | NYSE Composite vs. Victorias Secret Co | NYSE Composite vs. Under Armour C | NYSE Composite vs. Steven Madden |
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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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