Correlation Between NYSE Composite and Northern
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Northern 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 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 Quality Esg, you can compare the effects of market volatilities on NYSE Composite and Northern 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. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Northern.
Diversification Opportunities for NYSE Composite and Northern
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between NYSE and Northern is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Northern Quality Esg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Quality Esg 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. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Quality Esg has no effect on the direction of NYSE Composite i.e., NYSE Composite and Northern go up and down completely randomly.
Pair Corralation between NYSE Composite and Northern
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.41 times less return on investment than Northern. But when comparing it to its historical volatility, NYSE Composite is 1.17 times less risky than Northern. It trades about 0.17 of its potential returns per unit of risk. Northern Quality Esg is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 2,009 in Northern Quality Esg on September 3, 2024 and sell it today you would earn a total of 190.00 from holding Northern Quality Esg or generate 9.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Northern Quality Esg
Performance |
| Timeline |
NYSE Composite and Northern Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Northern Quality Esg
Pair trading matchups for Northern
Pair Trading with NYSE Composite and Northern
The main advantage of trading using opposite NYSE Composite and Northern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Northern 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 will offset losses from the drop in Northern's long position.| NYSE Composite vs. Lindblad Expeditions Holdings | NYSE Composite vs. LB Foster | NYSE Composite vs. HUTCHMED DRC | NYSE Composite vs. Bridgford Foods |
| Northern vs. Legg Mason Bw | Northern vs. Pgim Jennison Diversified | Northern vs. Adams Diversified Equity | Northern vs. Jhancock Diversified Macro |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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