Correlation Between NYSE Composite and Payden Emerging
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Payden 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 Payden 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 Payden Emerging Markets, you can compare the effects of market volatilities on NYSE Composite and Payden 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 Payden Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Payden Emerging.
Diversification Opportunities for NYSE Composite and Payden Emerging
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NYSE and Payden is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Payden Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden 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 Payden Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payden Emerging Markets has no effect on the direction of NYSE Composite i.e., NYSE Composite and Payden Emerging go up and down completely randomly.
Pair Corralation between NYSE Composite and Payden Emerging
Assuming the 90 days trading horizon NYSE Composite is expected to generate 2.03 times more return on investment than Payden Emerging. However, NYSE Composite is 2.03 times more volatile than Payden Emerging Markets. It trades about 0.24 of its potential returns per unit of risk. Payden Emerging Markets is currently generating about 0.2 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 | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Payden Emerging Markets
Performance |
| Timeline |
NYSE Composite and Payden Emerging Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Payden Emerging Markets
Pair trading matchups for Payden Emerging
Pair Trading with NYSE Composite and Payden Emerging
The main advantage of trading using opposite NYSE Composite and Payden Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Payden 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 Payden Emerging will offset losses from the drop in Payden 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 |
| Payden Emerging vs. Calvert Moderate Allocation | Payden Emerging vs. Qs Moderate Growth | Payden Emerging vs. Blackrock Moderate Prepared | Payden Emerging vs. Jp Morgan Smartretirement |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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