Correlation Between NYSE Composite and High Yield
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and High Yield 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 High Yield into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and High Yield Portfolio, you can compare the effects of market volatilities on NYSE Composite and High Yield 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 High Yield. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and High Yield.
Diversification Opportunities for NYSE Composite and High Yield
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NYSE and High is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and High Yield Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Yield Portfolio 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 High Yield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Yield Portfolio has no effect on the direction of NYSE Composite i.e., NYSE Composite and High Yield go up and down completely randomly.
Pair Corralation between NYSE Composite and High Yield
Assuming the 90 days trading horizon NYSE Composite is expected to generate 3.06 times more return on investment than High Yield. However, NYSE Composite is 3.06 times more volatile than High Yield Portfolio. It trades about 0.08 of its potential returns per unit of risk. High Yield Portfolio is currently generating about 0.16 per unit of risk. If you would invest 1,521,826 in NYSE Composite on September 14, 2024 and sell it today you would earn a total of 455,083 from holding NYSE Composite or generate 29.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
NYSE Composite vs. High Yield Portfolio
Performance |
| Timeline |
NYSE Composite and High Yield Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
High Yield Portfolio
Pair trading matchups for High Yield
Pair Trading with NYSE Composite and High Yield
The main advantage of trading using opposite NYSE Composite and High Yield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, High Yield 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 High Yield will offset losses from the drop in High Yield's long position.| NYSE Composite vs. Air Products and | NYSE Composite vs. Allient | NYSE Composite vs. Ecovyst | NYSE Composite vs. CTS Corporation |
| High Yield vs. Guidemark Large Cap | High Yield vs. Fm Investments Large | High Yield vs. Jhancock Disciplined Value | High Yield vs. Morningstar Unconstrained Allocation |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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