Correlation Between NYSE Composite and Schwab Broad
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Schwab Broad 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 Schwab Broad into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Schwab Broad Market, you can compare the effects of market volatilities on NYSE Composite and Schwab Broad 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 Schwab Broad. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Schwab Broad.
Diversification Opportunities for NYSE Composite and Schwab Broad
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NYSE and Schwab is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Schwab Broad Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Broad Market 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 Schwab Broad. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Broad Market has no effect on the direction of NYSE Composite i.e., NYSE Composite and Schwab Broad go up and down completely randomly.
Pair Corralation between NYSE Composite and Schwab Broad
Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.8 times more return on investment than Schwab Broad. However, NYSE Composite is 1.25 times less risky than Schwab Broad. It trades about 0.32 of its potential returns per unit of risk. Schwab Broad Market is currently generating about 0.2 per unit of risk. If you would invest 1,909,542 in NYSE Composite on November 3, 2024 and sell it today you would earn a total of 90,340 from holding NYSE Composite or generate 4.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Schwab Broad Market
Performance |
| Timeline |
NYSE Composite and Schwab Broad Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Schwab Broad Market
Pair trading matchups for Schwab Broad
Pair Trading with NYSE Composite and Schwab Broad
The main advantage of trading using opposite NYSE Composite and Schwab Broad positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Schwab Broad 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 Schwab Broad will offset losses from the drop in Schwab Broad's long position.| NYSE Composite vs. Arrow Electronics | NYSE Composite vs. Cirmaker Technology | NYSE Composite vs. Zhihu Inc ADR | NYSE Composite vs. Weibo Corp |
| Schwab Broad vs. Schwab International Equity | Schwab Broad vs. Schwab Large Cap ETF | Schwab Broad vs. Schwab Small Cap ETF | Schwab Broad vs. Schwab Large Cap Growth |
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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