Correlation Between NYSE Composite and Norwood Financial
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Norwood Financial 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 Norwood Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Norwood Financial Corp, you can compare the effects of market volatilities on NYSE Composite and Norwood Financial 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 Norwood Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Norwood Financial.
Diversification Opportunities for NYSE Composite and Norwood Financial
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NYSE and Norwood is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Norwood Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norwood Financial Corp 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 Norwood Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norwood Financial Corp has no effect on the direction of NYSE Composite i.e., NYSE Composite and Norwood Financial go up and down completely randomly.
Pair Corralation between NYSE Composite and Norwood Financial
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.11 times less return on investment than Norwood Financial. But when comparing it to its historical volatility, NYSE Composite is 4.11 times less risky than Norwood Financial. It trades about 0.42 of its potential returns per unit of risk. Norwood Financial Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2,933 in Norwood Financial Corp on September 1, 2024 and sell it today you would earn a total of 157.00 from holding Norwood Financial Corp or generate 5.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Norwood Financial Corp
Performance |
| Timeline |
NYSE Composite and Norwood Financial Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Norwood Financial Corp
Pair trading matchups for Norwood Financial
Pair Trading with NYSE Composite and Norwood Financial
The main advantage of trading using opposite NYSE Composite and Norwood Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Norwood Financial 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 Norwood Financial will offset losses from the drop in Norwood Financial's long position.| NYSE Composite vs. Acumen Pharmaceuticals | NYSE Composite vs. Mind Medicine | NYSE Composite vs. NL Industries | NYSE Composite vs. Ecovyst |
| Norwood Financial vs. Chemung Financial Corp | Norwood Financial vs. Home Federal Bancorp | Norwood Financial vs. Rhinebeck Bancorp | Norwood Financial vs. Finward Bancorp |
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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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