Correlation Between NYSE Composite and SPDR SP
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and SPDR SP 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 SPDR SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and SPDR SP North, you can compare the effects of market volatilities on NYSE Composite and SPDR SP 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 SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and SPDR SP.
Diversification Opportunities for NYSE Composite and SPDR SP
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NYSE and SPDR is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and SPDR SP North in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP North 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 SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP North has no effect on the direction of NYSE Composite i.e., NYSE Composite and SPDR SP go up and down completely randomly.
Pair Corralation between NYSE Composite and SPDR SP
Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.61 times more return on investment than SPDR SP. However, NYSE Composite is 1.63 times less risky than SPDR SP. It trades about 0.08 of its potential returns per unit of risk. SPDR SP North is currently generating about 0.02 per unit of risk. If you would invest 1,508,153 in NYSE Composite on September 12, 2024 and sell it today you would earn a total of 480,037 from holding NYSE Composite or generate 31.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
NYSE Composite vs. SPDR SP North
Performance |
| Timeline |
NYSE Composite and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
SPDR SP North
Pair trading matchups for SPDR SP
Pair Trading with NYSE Composite and SPDR SP
The main advantage of trading using opposite NYSE Composite and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, SPDR SP 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 SPDR SP will offset losses from the drop in SPDR SP's long position.| NYSE Composite vs. Teleflex Incorporated | NYSE Composite vs. Victorias Secret Co | NYSE Composite vs. Under Armour C | NYSE Composite vs. Steven Madden |
| SPDR SP vs. SPDR SP Global | SPDR SP vs. FlexShares Morningstar Global | SPDR SP vs. SPDR Russell 1000 | SPDR SP vs. SPDR MSCI EAFE |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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