Correlation Between NYSE Composite and NEO
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and NEO 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 NEO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and NEO, you can compare the effects of market volatilities on NYSE Composite and NEO 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 NEO. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and NEO.
Diversification Opportunities for NYSE Composite and NEO
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NYSE and NEO is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and NEO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEO 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 NEO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEO has no effect on the direction of NYSE Composite i.e., NYSE Composite and NEO go up and down completely randomly.
Pair Corralation between NYSE Composite and NEO
Assuming the 90 days trading horizon NYSE Composite is expected to generate 10.53 times less return on investment than NEO. But when comparing it to its historical volatility, NYSE Composite is 6.79 times less risky than NEO. It trades about 0.41 of its potential returns per unit of risk. NEO is currently generating about 0.63 of returns per unit of risk over similar time horizon. If you would invest 924.00 in NEO on September 2, 2024 and sell it today you would earn a total of 676.00 from holding NEO or generate 73.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
NYSE Composite vs. NEO
Performance |
| Timeline |
NYSE Composite and NEO Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
NEO
Pair trading matchups for NEO
Pair Trading with NYSE Composite and NEO
The main advantage of trading using opposite NYSE Composite and NEO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, NEO 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 NEO will offset losses from the drop in NEO's long position.| NYSE Composite vs. Simon Property Group | NYSE Composite vs. Merit Medical Systems | NYSE Composite vs. Catalent | NYSE Composite vs. Titan Machinery |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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