Correlation Between NYSE Composite and Inverse Emerging
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Inverse 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 Inverse 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 Inverse Emerging Markets, you can compare the effects of market volatilities on NYSE Composite and Inverse 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 Inverse Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Inverse Emerging.
Diversification Opportunities for NYSE Composite and Inverse Emerging
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between NYSE and Inverse is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Inverse Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inverse 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 Inverse Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inverse Emerging Markets has no effect on the direction of NYSE Composite i.e., NYSE Composite and Inverse Emerging go up and down completely randomly.
Pair Corralation between NYSE Composite and Inverse Emerging
Assuming the 90 days trading horizon NYSE Composite is expected to generate 18.89 times less return on investment than Inverse Emerging. But when comparing it to its historical volatility, NYSE Composite is 4.11 times less risky than Inverse Emerging. It trades about 0.02 of its potential returns per unit of risk. Inverse Emerging Markets is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 764.00 in Inverse Emerging Markets on September 13, 2024 and sell it today you would earn a total of 60.00 from holding Inverse Emerging Markets or generate 7.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.67% |
| Values | Daily Returns |
NYSE Composite vs. Inverse Emerging Markets
Performance |
| Timeline |
NYSE Composite and Inverse Emerging Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Inverse Emerging Markets
Pair trading matchups for Inverse Emerging
Pair Trading with NYSE Composite and Inverse Emerging
The main advantage of trading using opposite NYSE Composite and Inverse Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Inverse 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 Inverse Emerging will offset losses from the drop in Inverse Emerging's long position.| NYSE Composite vs. Boston Beer | NYSE Composite vs. Freedom Bank of | NYSE Composite vs. KeyCorp | NYSE Composite vs. LithiumBank Resources Corp |
| Inverse Emerging vs. Grizzly Short Fund | Inverse Emerging vs. Inverse Sp 500 | Inverse Emerging vs. HUMANA INC | Inverse Emerging vs. Barloworld Ltd ADR |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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