Correlation Between NYSE Composite and Energy Fund
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Energy Fund 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 Energy Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Energy Fund Class, you can compare the effects of market volatilities on NYSE Composite and Energy Fund 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 Energy Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Energy Fund.
Diversification Opportunities for NYSE Composite and Energy Fund
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NYSE and Energy is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Energy Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Fund Class 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 Energy Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Fund Class has no effect on the direction of NYSE Composite i.e., NYSE Composite and Energy Fund go up and down completely randomly.
Pair Corralation between NYSE Composite and Energy Fund
Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.57 times more return on investment than Energy Fund. However, NYSE Composite is 1.76 times less risky than Energy Fund. It trades about 0.11 of its potential returns per unit of risk. Energy Fund Class is currently generating about 0.04 per unit of risk. If you would invest 1,550,264 in NYSE Composite on August 31, 2024 and sell it today you would earn a total of 476,940 from holding NYSE Composite or generate 30.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.73% |
| Values | Daily Returns |
NYSE Composite vs. Energy Fund Class
Performance |
| Timeline |
NYSE Composite and Energy Fund Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Energy Fund Class
Pair trading matchups for Energy Fund
Pair Trading with NYSE Composite and Energy Fund
The main advantage of trading using opposite NYSE Composite and Energy Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Energy Fund 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 Energy Fund will offset losses from the drop in Energy Fund's long position.| NYSE Composite vs. Nextplat Corp | NYSE Composite vs. Qualys Inc | NYSE Composite vs. Cadence Design Systems | NYSE Composite vs. Asure Software |
| Energy Fund vs. Alphacentric Lifesci Healthcare | Energy Fund vs. Blackrock Health Sciences | Energy Fund vs. Baillie Gifford Health | Energy Fund vs. Fidelity Advisor Health |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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