Correlation Between NYSE Composite and NLG
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and NLG 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 NLG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and NLG, you can compare the effects of market volatilities on NYSE Composite and NLG 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 NLG. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and NLG.
Diversification Opportunities for NYSE Composite and NLG
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between NYSE and NLG is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and NLG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NLG 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 NLG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NLG has no effect on the direction of NYSE Composite i.e., NYSE Composite and NLG go up and down completely randomly.
Pair Corralation between NYSE Composite and NLG
Assuming the 90 days trading horizon NYSE Composite is expected to generate 6.42 times less return on investment than NLG. But when comparing it to its historical volatility, NYSE Composite is 3.29 times less risky than NLG. It trades about 0.11 of its potential returns per unit of risk. NLG is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 0.44 in NLG on September 2, 2024 and sell it today you would earn a total of 0.07 from holding NLG or generate 14.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 8.33% |
| Values | Daily Returns |
NYSE Composite vs. NLG
Performance |
| Timeline |
NYSE Composite and NLG Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
NLG
Pair trading matchups for NLG
Pair Trading with NYSE Composite and NLG
The main advantage of trading using opposite NYSE Composite and NLG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, NLG 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 NLG will offset losses from the drop in NLG'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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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