Correlation Between NYSE Composite and HCM Defender
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and HCM Defender 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 HCM Defender into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and HCM Defender 500, you can compare the effects of market volatilities on NYSE Composite and HCM Defender 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 HCM Defender. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and HCM Defender.
Diversification Opportunities for NYSE Composite and HCM Defender
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between NYSE and HCM is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and HCM Defender 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCM Defender 500 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 HCM Defender. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HCM Defender 500 has no effect on the direction of NYSE Composite i.e., NYSE Composite and HCM Defender go up and down completely randomly.
Pair Corralation between NYSE Composite and HCM Defender
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.04 times less return on investment than HCM Defender. But when comparing it to its historical volatility, NYSE Composite is 1.92 times less risky than HCM Defender. It trades about 0.26 of its potential returns per unit of risk. HCM Defender 500 is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 5,167 in HCM Defender 500 on August 30, 2024 and sell it today you would earn a total of 193.00 from holding HCM Defender 500 or generate 3.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
NYSE Composite vs. HCM Defender 500
Performance |
| Timeline |
NYSE Composite and HCM Defender Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
HCM Defender 500
Pair trading matchups for HCM Defender
Pair Trading with NYSE Composite and HCM Defender
The main advantage of trading using opposite NYSE Composite and HCM Defender positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, HCM Defender 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 HCM Defender will offset losses from the drop in HCM Defender's long position.| NYSE Composite vs. Delek Drilling | NYSE Composite vs. Helmerich and Payne | NYSE Composite vs. Waste Management | NYSE Composite vs. US Global Investors |
| HCM Defender vs. HCM Defender 100 | HCM Defender vs. Overlay Shares Large | HCM Defender vs. VanEck LongFlat Trend | HCM Defender vs. LeaderSharesTM AlphaFactor Core |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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