Correlation Between NYSE Composite and National Energy
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and National Energy 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 National Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and National Energy Services, you can compare the effects of market volatilities on NYSE Composite and National Energy 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 National Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and National Energy.
Diversification Opportunities for NYSE Composite and National Energy
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NYSE and National is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and National Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Energy Services 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 National Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Energy Services has no effect on the direction of NYSE Composite i.e., NYSE Composite and National Energy go up and down completely randomly.
Pair Corralation between NYSE Composite and National Energy
Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.09 times more return on investment than National Energy. However, NYSE Composite is 11.75 times less risky than National Energy. It trades about -0.02 of its potential returns per unit of risk. National Energy Services is currently generating about -0.17 per unit of risk. If you would invest 1,998,000 in NYSE Composite on November 28, 2024 and sell it today you would lose (5,595) from holding NYSE Composite or give up 0.28% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. National Energy Services
Performance |
| Timeline |
NYSE Composite and National Energy Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
National Energy Services
Pair trading matchups for National Energy
Pair Trading with NYSE Composite and National Energy
The main advantage of trading using opposite NYSE Composite and National Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, National Energy 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 National Energy will offset losses from the drop in National Energy's long position.| NYSE Composite vs. Inter Parfums | NYSE Composite vs. Amkor Technology | NYSE Composite vs. Unilever PLC ADR | NYSE Composite vs. Estee Lauder Companies |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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