Correlation Between NYSE Composite and Smallcap World
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Smallcap World 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 Smallcap World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Smallcap World Fund, you can compare the effects of market volatilities on NYSE Composite and Smallcap World 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 Smallcap World. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Smallcap World.
Diversification Opportunities for NYSE Composite and Smallcap World
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NYSE and Smallcap is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Smallcap World Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smallcap World 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 Smallcap World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smallcap World has no effect on the direction of NYSE Composite i.e., NYSE Composite and Smallcap World go up and down completely randomly.
Pair Corralation between NYSE Composite and Smallcap World
Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.75 times more return on investment than Smallcap World. However, NYSE Composite is 1.33 times less risky than Smallcap World. It trades about 0.11 of its potential returns per unit of risk. Smallcap World Fund is currently generating about 0.05 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 | Strong |
| Accuracy | 99.73% |
| Values | Daily Returns |
NYSE Composite vs. Smallcap World Fund
Performance |
| Timeline |
NYSE Composite and Smallcap World Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Smallcap World Fund
Pair trading matchups for Smallcap World
Pair Trading with NYSE Composite and Smallcap World
The main advantage of trading using opposite NYSE Composite and Smallcap World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Smallcap World 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 Smallcap World will offset losses from the drop in Smallcap World's long position.| NYSE Composite vs. Nextplat Corp | NYSE Composite vs. Qualys Inc | NYSE Composite vs. Cadence Design Systems | NYSE Composite vs. Asure Software |
| Smallcap World vs. Goldman Sachs Technology | Smallcap World vs. Allianzgi Technology Fund | Smallcap World vs. Icon Information Technology | Smallcap World vs. Biotechnology Fund Class |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
Other Complementary Tools
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments |