Correlation Between NYSE Composite and LPL Financial
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and LPL Financial 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 LPL Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and LPL Financial Holdings, you can compare the effects of market volatilities on NYSE Composite and LPL Financial 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 LPL Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and LPL Financial.
Diversification Opportunities for NYSE Composite and LPL Financial
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NYSE and LPL is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and LPL Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LPL Financial Holdings 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 LPL Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LPL Financial Holdings has no effect on the direction of NYSE Composite i.e., NYSE Composite and LPL Financial go up and down completely randomly.
Pair Corralation between NYSE Composite and LPL Financial
Assuming the 90 days trading horizon NYSE Composite is expected to generate 2.85 times less return on investment than LPL Financial. But when comparing it to its historical volatility, NYSE Composite is 4.55 times less risky than LPL Financial. It trades about 0.42 of its potential returns per unit of risk. LPL Financial Holdings is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 28,191 in LPL Financial Holdings on September 1, 2024 and sell it today you would earn a total of 4,324 from holding LPL Financial Holdings or generate 15.34% 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. LPL Financial Holdings
Performance |
| Timeline |
NYSE Composite and LPL Financial Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
LPL Financial Holdings
Pair trading matchups for LPL Financial
Pair Trading with NYSE Composite and LPL Financial
The main advantage of trading using opposite NYSE Composite and LPL Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, LPL Financial 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 LPL Financial will offset losses from the drop in LPL Financial's long position.| NYSE Composite vs. Acumen Pharmaceuticals | NYSE Composite vs. Mind Medicine | NYSE Composite vs. NL Industries | NYSE Composite vs. Ecovyst |
| LPL Financial vs. Tradeweb Markets | LPL Financial vs. Raymond James Financial | LPL Financial vs. PJT Partners | LPL Financial vs. Moelis Co |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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