Correlation Between NYSE Composite and Sp 500
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Sp 500 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 Sp 500 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Sp 500 Pure, you can compare the effects of market volatilities on NYSE Composite and Sp 500 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 Sp 500. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Sp 500.
Diversification Opportunities for NYSE Composite and Sp 500
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between NYSE and RYAWX is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Sp 500 Pure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sp 500 Pure 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 Sp 500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sp 500 Pure has no effect on the direction of NYSE Composite i.e., NYSE Composite and Sp 500 go up and down completely randomly.
Pair Corralation between NYSE Composite and Sp 500
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.54 times less return on investment than Sp 500. But when comparing it to its historical volatility, NYSE Composite is 1.84 times less risky than Sp 500. It trades about 0.13 of its potential returns per unit of risk. Sp 500 Pure is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 8,910 in Sp 500 Pure on August 25, 2024 and sell it today you would earn a total of 1,597 from holding Sp 500 Pure or generate 17.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Sp 500 Pure
Performance |
| Timeline |
NYSE Composite and Sp 500 Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Sp 500 Pure
Pair trading matchups for Sp 500
Pair Trading with NYSE Composite and Sp 500
The main advantage of trading using opposite NYSE Composite and Sp 500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Sp 500 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 Sp 500 will offset losses from the drop in Sp 500's long position.| NYSE Composite vs. Awilco Drilling PLC | NYSE Composite vs. AKITA Drilling | NYSE Composite vs. SunOpta | NYSE Composite vs. Delek Drilling |
| Sp 500 vs. HUMANA INC | Sp 500 vs. Aquagold International | Sp 500 vs. Barloworld Ltd ADR | Sp 500 vs. Morningstar Unconstrained Allocation |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
Other Complementary Tools
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk |