Correlation Between NYSE Composite and Large Cap
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Large Cap 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 Large Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Large Cap Value, you can compare the effects of market volatilities on NYSE Composite and Large Cap 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 Large Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Large Cap.
Diversification Opportunities for NYSE Composite and Large Cap
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NYSE and Large is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Large Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Cap Value 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 Large Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Large Cap Value has no effect on the direction of NYSE Composite i.e., NYSE Composite and Large Cap go up and down completely randomly.
Pair Corralation between NYSE Composite and Large Cap
Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.73 times more return on investment than Large Cap. However, NYSE Composite is 1.38 times less risky than Large Cap. It trades about 0.08 of its potential returns per unit of risk. Large Cap Value is currently generating about 0.04 per unit of risk. If you would invest 1,539,994 in NYSE Composite on August 29, 2024 and sell it today you would earn a total of 481,951 from holding NYSE Composite or generate 31.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Large Cap Value
Performance |
| Timeline |
NYSE Composite and Large Cap Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Large Cap Value
Pair trading matchups for Large Cap
Pair Trading with NYSE Composite and Large Cap
The main advantage of trading using opposite NYSE Composite and Large Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Large Cap 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 Large Cap will offset losses from the drop in Large Cap's long position.| NYSE Composite vs. Vita Coco | NYSE Composite vs. Franklin Wireless Corp | NYSE Composite vs. Ambev SA ADR | NYSE Composite vs. Toro Co |
| Large Cap vs. Gabelli Gold Fund | Large Cap vs. Global Gold Fund | Large Cap vs. Wells Fargo Advantage | Large Cap vs. Short Precious Metals |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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