Correlation Between NYSE Composite and Mid Capitalization
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Mid Capitalization 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 Mid Capitalization into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Mid Capitalization Portfolio, you can compare the effects of market volatilities on NYSE Composite and Mid Capitalization 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 Mid Capitalization. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Mid Capitalization.
Diversification Opportunities for NYSE Composite and Mid Capitalization
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between NYSE and Mid is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Mid Capitalization Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Capitalization 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 Mid Capitalization. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid Capitalization has no effect on the direction of NYSE Composite i.e., NYSE Composite and Mid Capitalization go up and down completely randomly.
Pair Corralation between NYSE Composite and Mid Capitalization
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.35 times less return on investment than Mid Capitalization. But when comparing it to its historical volatility, NYSE Composite is 1.33 times less risky than Mid Capitalization. It trades about 0.08 of its potential returns per unit of risk. Mid Capitalization Portfolio is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,215 in Mid Capitalization Portfolio on September 1, 2024 and sell it today you would earn a total of 475.00 from holding Mid Capitalization Portfolio or generate 39.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.78% |
| Values | Daily Returns |
NYSE Composite vs. Mid Capitalization Portfolio
Performance |
| Timeline |
NYSE Composite and Mid Capitalization Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Mid Capitalization Portfolio
Pair trading matchups for Mid Capitalization
Pair Trading with NYSE Composite and Mid Capitalization
The main advantage of trading using opposite NYSE Composite and Mid Capitalization positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Mid Capitalization 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 Mid Capitalization will offset losses from the drop in Mid Capitalization's long position.| NYSE Composite vs. Acumen Pharmaceuticals | NYSE Composite vs. Mind Medicine | NYSE Composite vs. NL Industries | NYSE Composite vs. Ecovyst |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
Other Complementary Tools
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk |