Correlation Between NYSE Composite and Micro E
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Micro E 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 Micro E into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Micro E mini Russell, you can compare the effects of market volatilities on NYSE Composite and Micro E 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 Micro E. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Micro E.
Diversification Opportunities for NYSE Composite and Micro E
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NYSE and Micro is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Micro E mini Russell in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micro E mini 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 Micro E. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micro E mini has no effect on the direction of NYSE Composite i.e., NYSE Composite and Micro E go up and down completely randomly.
Pair Corralation between NYSE Composite and Micro E
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.81 times less return on investment than Micro E. But when comparing it to its historical volatility, NYSE Composite is 2.59 times less risky than Micro E. It trades about 0.42 of its potential returns per unit of risk. Micro E mini Russell is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 220,860 in Micro E mini Russell on September 1, 2024 and sell it today you would earn a total of 23,600 from holding Micro E mini Russell or generate 10.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 91.3% |
| Values | Daily Returns |
NYSE Composite vs. Micro E mini Russell
Performance |
| Timeline |
NYSE Composite and Micro E Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Micro E mini Russell
Pair trading matchups for Micro E
Pair Trading with NYSE Composite and Micro E
The main advantage of trading using opposite NYSE Composite and Micro E positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Micro E 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 Micro E will offset losses from the drop in Micro E's long position.| NYSE Composite vs. Acumen Pharmaceuticals | NYSE Composite vs. Mind Medicine | NYSE Composite vs. NL Industries | NYSE Composite vs. Ecovyst |
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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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