Correlation Between NYSE Composite and Northern Emerging
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Northern Emerging 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 Emerging 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 Emerging Markets, you can compare the effects of market volatilities on NYSE Composite and Northern Emerging 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 Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Northern Emerging.
Diversification Opportunities for NYSE Composite and Northern Emerging
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NYSE and Northern is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Northern Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Emerging Markets 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 Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Emerging Markets has no effect on the direction of NYSE Composite i.e., NYSE Composite and Northern Emerging go up and down completely randomly.
Pair Corralation between NYSE Composite and Northern Emerging
Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.73 times more return on investment than Northern Emerging. However, NYSE Composite is 1.37 times less risky than Northern Emerging. It trades about 0.24 of its potential returns per unit of risk. Northern Emerging Markets is currently generating about -0.22 per unit of risk. If you would invest 1,954,967 in NYSE Composite on August 29, 2024 and sell it today you would earn a total of 66,978 from holding NYSE Composite or generate 3.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Northern Emerging Markets
Performance |
| Timeline |
NYSE Composite and Northern Emerging Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Northern Emerging Markets
Pair trading matchups for Northern Emerging
Pair Trading with NYSE Composite and Northern Emerging
The main advantage of trading using opposite NYSE Composite and Northern Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Northern Emerging 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 Emerging will offset losses from the drop in Northern Emerging's long position.| NYSE Composite vs. Vita Coco | NYSE Composite vs. Franklin Wireless Corp | NYSE Composite vs. Ambev SA ADR | NYSE Composite vs. Toro Co |
| Northern Emerging vs. Nasdaq 100 2x Strategy | Northern Emerging vs. Rbc Bluebay Emerging | Northern Emerging vs. Dws Emerging Markets | Northern Emerging vs. Siit Emerging Markets |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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