Correlation Between NYSE Composite and SBC Communications
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and SBC Communications 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 SBC Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and SBC Communications, you can compare the effects of market volatilities on NYSE Composite and SBC Communications 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 SBC Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and SBC Communications.
Diversification Opportunities for NYSE Composite and SBC Communications
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between NYSE and SBC is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and SBC Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBC Communications 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 SBC Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBC Communications has no effect on the direction of NYSE Composite i.e., NYSE Composite and SBC Communications go up and down completely randomly.
Pair Corralation between NYSE Composite and SBC Communications
Assuming the 90 days trading horizon NYSE Composite is expected to under-perform the SBC Communications. But the index apears to be less risky and, when comparing its historical volatility, NYSE Composite is 4.96 times less risky than SBC Communications. The index trades about -0.02 of its potential returns per unit of risk. The SBC Communications is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 502.00 in SBC Communications on November 28, 2024 and sell it today you would lose (1.00) from holding SBC Communications or give up 0.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. SBC Communications
Performance |
| Timeline |
NYSE Composite and SBC Communications Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
SBC Communications
Pair trading matchups for SBC Communications
Pair Trading with NYSE Composite and SBC Communications
The main advantage of trading using opposite NYSE Composite and SBC Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, SBC Communications 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 SBC Communications will offset losses from the drop in SBC Communications' long position.| NYSE Composite vs. Inter Parfums | NYSE Composite vs. Amkor Technology | NYSE Composite vs. Unilever PLC ADR | NYSE Composite vs. Estee Lauder Companies |
| SBC Communications vs. Nordic Semiconductor ASA | SBC Communications vs. Triumph Apparel | SBC Communications vs. G III Apparel Group | SBC Communications vs. Qorvo Inc |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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