Correlation Between NYSE Composite and NAS
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and NAS 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 NAS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and NAS, you can compare the effects of market volatilities on NYSE Composite and NAS 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 NAS. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and NAS.
Diversification Opportunities for NYSE Composite and NAS
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NYSE and NAS is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and NAS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NAS 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 NAS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NAS has no effect on the direction of NYSE Composite i.e., NYSE Composite and NAS go up and down completely randomly.
Pair Corralation between NYSE Composite and NAS
Assuming the 90 days trading horizon NYSE Composite is expected to generate 9.93 times less return on investment than NAS. But when comparing it to its historical volatility, NYSE Composite is 14.91 times less risky than NAS. It trades about 0.21 of its potential returns per unit of risk. NAS is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 0.45 in NAS on August 27, 2024 and sell it today you would earn a total of 0.09 from holding NAS or generate 20.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. NAS
Performance |
| Timeline |
NYSE Composite and NAS Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
NAS
Pair trading matchups for NAS
Pair Trading with NYSE Composite and NAS
The main advantage of trading using opposite NYSE Composite and NAS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, NAS 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 NAS will offset losses from the drop in NAS's long position.| NYSE Composite vs. Hooker Furniture | NYSE Composite vs. Hudson Pacific Properties | NYSE Composite vs. Canlan Ice Sports | NYSE Composite vs. Boston Properties |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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