Correlation Between NYSE Composite and Power Momentum
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Power Momentum 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 Power Momentum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Power Momentum Index, you can compare the effects of market volatilities on NYSE Composite and Power Momentum 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 Power Momentum. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Power Momentum.
Diversification Opportunities for NYSE Composite and Power Momentum
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between NYSE and Power is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Power Momentum Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Momentum Index 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 Power Momentum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Momentum Index has no effect on the direction of NYSE Composite i.e., NYSE Composite and Power Momentum go up and down completely randomly.
Pair Corralation between NYSE Composite and Power Momentum
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.32 times less return on investment than Power Momentum. But when comparing it to its historical volatility, NYSE Composite is 1.54 times less risky than Power Momentum. It trades about 0.14 of its potential returns per unit of risk. Power Momentum Index is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,120 in Power Momentum Index on September 2, 2024 and sell it today you would earn a total of 386.00 from holding Power Momentum Index or generate 34.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Power Momentum Index
Performance |
| Timeline |
NYSE Composite and Power Momentum Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Power Momentum Index
Pair trading matchups for Power Momentum
Pair Trading with NYSE Composite and Power Momentum
The main advantage of trading using opposite NYSE Composite and Power Momentum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Power Momentum 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 Power Momentum will offset losses from the drop in Power Momentum's long position.| NYSE Composite vs. Simon Property Group | NYSE Composite vs. Merit Medical Systems | NYSE Composite vs. Catalent | NYSE Composite vs. Titan Machinery |
| Power Momentum vs. Omni Small Cap Value | Power Momentum vs. Bbh Partner Fund | Power Momentum vs. Eic Value Fund | Power Momentum vs. Commonwealth Global Fund |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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