Correlation Between NYSE Composite and Smith Nephew
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Smith Nephew 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 Smith Nephew into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Smith Nephew plc, you can compare the effects of market volatilities on NYSE Composite and Smith Nephew 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 Smith Nephew. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Smith Nephew.
Diversification Opportunities for NYSE Composite and Smith Nephew
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between NYSE and Smith is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Smith Nephew plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smith Nephew plc 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 Smith Nephew. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smith Nephew plc has no effect on the direction of NYSE Composite i.e., NYSE Composite and Smith Nephew go up and down completely randomly.
Pair Corralation between NYSE Composite and Smith Nephew
Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.27 times more return on investment than Smith Nephew. However, NYSE Composite is 3.7 times less risky than Smith Nephew. It trades about 0.13 of its potential returns per unit of risk. Smith Nephew plc is currently generating about 0.01 per unit of risk. If you would invest 1,626,375 in NYSE Composite on August 27, 2024 and sell it today you would earn a total of 385,970 from holding NYSE Composite or generate 23.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 84.27% |
| Values | Daily Returns |
NYSE Composite vs. Smith Nephew plc
Performance |
| Timeline |
NYSE Composite and Smith Nephew Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Smith Nephew plc
Pair trading matchups for Smith Nephew
Pair Trading with NYSE Composite and Smith Nephew
The main advantage of trading using opposite NYSE Composite and Smith Nephew positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Smith Nephew 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 Smith Nephew will offset losses from the drop in Smith Nephew's long position.| NYSE Composite vs. Grocery Outlet Holding | NYSE Composite vs. Tencent Music Entertainment | NYSE Composite vs. SunLink Health Systems | NYSE Composite vs. Getty Realty |
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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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