Correlation Between NYSE Composite and MT Bank
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and MT Bank 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 MT Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and MT Bank, you can compare the effects of market volatilities on NYSE Composite and MT Bank 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 MT Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and MT Bank.
Diversification Opportunities for NYSE Composite and MT Bank
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NYSE and MTB is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and MT Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MT Bank 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 MT Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MT Bank has no effect on the direction of NYSE Composite i.e., NYSE Composite and MT Bank go up and down completely randomly.
Pair Corralation between NYSE Composite and MT Bank
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.43 times less return on investment than MT Bank. But when comparing it to its historical volatility, NYSE Composite is 2.98 times less risky than MT Bank. It trades about 0.11 of its potential returns per unit of risk. MT Bank is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 19,107 in MT Bank on November 1, 2024 and sell it today you would earn a total of 1,093 from holding MT Bank or generate 5.72% 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. MT Bank
Performance |
| Timeline |
NYSE Composite and MT Bank Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
MT Bank
Pair trading matchups for MT Bank
Pair Trading with NYSE Composite and MT Bank
The main advantage of trading using opposite NYSE Composite and MT Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, MT Bank 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 MT Bank will offset losses from the drop in MT Bank's long position.| NYSE Composite vs. Pembina Pipeline | NYSE Composite vs. Precision Drilling | NYSE Composite vs. HUTCHMED DRC | NYSE Composite vs. Transocean |
| MT Bank vs. US Bancorp | MT Bank vs. Truist Financial Corp | MT Bank vs. Fifth Third Bancorp | MT Bank vs. KeyCorp |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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