Correlation Between NYSE Composite and NXT
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and NXT 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 NXT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and NXT, you can compare the effects of market volatilities on NYSE Composite and NXT 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 NXT. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and NXT.
Diversification Opportunities for NYSE Composite and NXT
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NYSE and NXT is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and NXT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NXT 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 NXT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NXT has no effect on the direction of NYSE Composite i.e., NYSE Composite and NXT go up and down completely randomly.
Pair Corralation between NYSE Composite and NXT
Assuming the 90 days trading horizon NYSE Composite is expected to generate 7.25 times less return on investment than NXT. But when comparing it to its historical volatility, NYSE Composite is 18.9 times less risky than NXT. It trades about 0.12 of its potential returns per unit of risk. NXT is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 0.14 in NXT on August 24, 2024 and sell it today you would lose (0.04) from holding NXT or give up 30.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 94.7% |
| Values | Daily Returns |
NYSE Composite vs. NXT
Performance |
| Timeline |
NYSE Composite and NXT Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
NXT
Pair trading matchups for NXT
Pair Trading with NYSE Composite and NXT
The main advantage of trading using opposite NYSE Composite and NXT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, NXT 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 NXT will offset losses from the drop in NXT's long position.| NYSE Composite vs. Akanda Corp | NYSE Composite vs. Valneva SE ADR | NYSE Composite vs. Radcom | NYSE Composite vs. Western Digital |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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