Correlation Between NYSE Composite and Northern Bond
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Northern Bond 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 Northern Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Northern Bond Index, you can compare the effects of market volatilities on NYSE Composite and Northern Bond 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 Northern Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Northern Bond.
Diversification Opportunities for NYSE Composite and Northern Bond
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between NYSE and Northern is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Northern Bond Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Bond Index 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 Northern Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Bond Index has no effect on the direction of NYSE Composite i.e., NYSE Composite and Northern Bond go up and down completely randomly.
Pair Corralation between NYSE Composite and Northern Bond
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.76 times more return on investment than Northern Bond. However, NYSE Composite is 1.76 times more volatile than Northern Bond Index. It trades about 0.42 of its potential returns per unit of risk. Northern Bond Index is currently generating about 0.09 per unit of risk. If you would invest 1,923,895 in NYSE Composite on September 1, 2024 and sell it today you would earn a total of 103,309 from holding NYSE Composite or generate 5.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
NYSE Composite vs. Northern Bond Index
Performance |
| Timeline |
NYSE Composite and Northern Bond Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Northern Bond Index
Pair trading matchups for Northern Bond
Pair Trading with NYSE Composite and Northern Bond
The main advantage of trading using opposite NYSE Composite and Northern Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Northern Bond 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 Northern Bond will offset losses from the drop in Northern Bond's long position.| NYSE Composite vs. Acumen Pharmaceuticals | NYSE Composite vs. Mind Medicine | NYSE Composite vs. NL Industries | NYSE Composite vs. Ecovyst |
| Northern Bond vs. Eagle Mlp Strategy | Northern Bond vs. Origin Emerging Markets | Northern Bond vs. Siit Emerging Markets | Northern Bond vs. Angel Oak Multi Strategy |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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