Correlation Between NYSE Composite and Provident Financial
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Provident 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 Provident 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 Provident Financial Services, you can compare the effects of market volatilities on NYSE Composite and Provident 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 Provident Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Provident Financial.
Diversification Opportunities for NYSE Composite and Provident Financial
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NYSE and Provident is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Provident Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Provident Financial 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 Provident Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Provident Financial has no effect on the direction of NYSE Composite i.e., NYSE Composite and Provident Financial go up and down completely randomly.
Pair Corralation between NYSE Composite and Provident Financial
Assuming the 90 days trading horizon NYSE Composite is expected to generate 5.82 times less return on investment than Provident Financial. But when comparing it to its historical volatility, NYSE Composite is 5.34 times less risky than Provident Financial. It trades about 0.13 of its potential returns per unit of risk. Provident Financial Services is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1,886 in Provident Financial Services on August 24, 2024 and sell it today you would earn a total of 199.00 from holding Provident Financial Services or generate 10.55% 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. Provident Financial Services
Performance |
| Timeline |
NYSE Composite and Provident Financial Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Provident Financial Services
Pair trading matchups for Provident Financial
Pair Trading with NYSE Composite and Provident Financial
The main advantage of trading using opposite NYSE Composite and Provident Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Provident 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 Provident Financial will offset losses from the drop in Provident Financial's long position.| NYSE Composite vs. Awilco Drilling PLC | NYSE Composite vs. AKITA Drilling | NYSE Composite vs. SunOpta | NYSE Composite vs. Delek Drilling |
| Provident Financial vs. First Mid Illinois | Provident Financial vs. ConnectOne Bancorp | Provident Financial vs. Finward Bancorp | Provident Financial vs. CrossFirst Bankshares |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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