Correlation Between NYSE Composite and SPDR Portfolio
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and SPDR Portfolio 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 SPDR Portfolio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and SPDR Portfolio MSCI, you can compare the effects of market volatilities on NYSE Composite and SPDR Portfolio 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 SPDR Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and SPDR Portfolio.
Diversification Opportunities for NYSE Composite and SPDR Portfolio
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NYSE and SPDR is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and SPDR Portfolio MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Portfolio MSCI 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 SPDR Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Portfolio MSCI has no effect on the direction of NYSE Composite i.e., NYSE Composite and SPDR Portfolio go up and down completely randomly.
Pair Corralation between NYSE Composite and SPDR Portfolio
Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.84 times more return on investment than SPDR Portfolio. However, NYSE Composite is 1.18 times less risky than SPDR Portfolio. It trades about 0.28 of its potential returns per unit of risk. SPDR Portfolio MSCI is currently generating about 0.13 per unit of risk. If you would invest 1,920,711 in NYSE Composite on October 24, 2024 and sell it today you would earn a total of 68,648 from holding NYSE Composite or generate 3.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. SPDR Portfolio MSCI
Performance |
| Timeline |
NYSE Composite and SPDR Portfolio Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
SPDR Portfolio MSCI
Pair trading matchups for SPDR Portfolio
Pair Trading with NYSE Composite and SPDR Portfolio
The main advantage of trading using opposite NYSE Composite and SPDR Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, SPDR Portfolio 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 SPDR Portfolio will offset losses from the drop in SPDR Portfolio's long position.| NYSE Composite vs. Datadog | NYSE Composite vs. Nasdaq Inc | NYSE Composite vs. Air Lease | NYSE Composite vs. EvoAir Holdings |
| SPDR Portfolio vs. SPDR Portfolio Europe | SPDR Portfolio vs. SPDR Portfolio Corporate | SPDR Portfolio vs. SPDR Portfolio Intermediate | SPDR Portfolio vs. SPDR MSCI EAFE |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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