Correlation Between NYSE Composite and NACCO Industries
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and NACCO Industries 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 NACCO Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and NACCO Industries, you can compare the effects of market volatilities on NYSE Composite and NACCO Industries 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 NACCO Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and NACCO Industries.
Diversification Opportunities for NYSE Composite and NACCO Industries
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NYSE and NACCO is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and NACCO Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NACCO Industries 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 NACCO Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NACCO Industries has no effect on the direction of NYSE Composite i.e., NYSE Composite and NACCO Industries go up and down completely randomly.
Pair Corralation between NYSE Composite and NACCO Industries
Assuming the 90 days trading horizon NYSE Composite is expected to generate 5.05 times less return on investment than NACCO Industries. But when comparing it to its historical volatility, NYSE Composite is 5.69 times less risky than NACCO Industries. It trades about 0.24 of its potential returns per unit of risk. NACCO Industries is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 2,758 in NACCO Industries on August 27, 2024 and sell it today you would earn a total of 471.00 from holding NACCO Industries or generate 17.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. NACCO Industries
Performance |
| Timeline |
NYSE Composite and NACCO Industries Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
NACCO Industries
Pair trading matchups for NACCO Industries
Pair Trading with NYSE Composite and NACCO Industries
The main advantage of trading using opposite NYSE Composite and NACCO Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, NACCO Industries 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 NACCO Industries will offset losses from the drop in NACCO Industries' long position.| NYSE Composite vs. Hooker Furniture | NYSE Composite vs. Hudson Pacific Properties | NYSE Composite vs. Canlan Ice Sports | NYSE Composite vs. Boston Properties |
| NACCO Industries vs. Alliance Resource Partners | NACCO Industries vs. Hallador Energy | NACCO Industries vs. Consol Energy | NACCO Industries vs. Indo Tambangraya Megah |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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