Correlation Between NYSE Composite and SP 500
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and SP 500 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 SP 500 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and SP 500 Energy, you can compare the effects of market volatilities on NYSE Composite and SP 500 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 SP 500. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and SP 500.
Diversification Opportunities for NYSE Composite and SP 500
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NYSE and SPNY is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and SP 500 Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SP 500 Energy 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 SP 500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SP 500 Energy has no effect on the direction of NYSE Composite i.e., NYSE Composite and SP 500 go up and down completely randomly.
Pair Corralation between NYSE Composite and SP 500
Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.6 times more return on investment than SP 500. However, NYSE Composite is 1.66 times less risky than SP 500. It trades about 0.13 of its potential returns per unit of risk. SP 500 Energy is currently generating about 0.06 per unit of risk. If you would invest 1,627,444 in NYSE Composite on September 4, 2024 and sell it today you would earn a total of 391,137 from holding NYSE Composite or generate 24.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.6% |
| Values | Daily Returns |
NYSE Composite vs. SP 500 Energy
Performance |
| Timeline |
NYSE Composite and SP 500 Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
SP 500 Energy
Pair trading matchups for SP 500
Pair Trading with NYSE Composite and SP 500
The main advantage of trading using opposite NYSE Composite and SP 500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, SP 500 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 SP 500 will offset losses from the drop in SP 500's long position.| NYSE Composite vs. Kite Realty Group | NYSE Composite vs. Tradeweb Markets | NYSE Composite vs. Meiwu Technology Co | NYSE Composite vs. Uber Technologies |
| SP 500 vs. FitLife Brands, Common | SP 500 vs. Marfrig Global Foods | SP 500 vs. Inflection Point Acquisition | SP 500 vs. Natural Alternatives International |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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