Correlation Between NYSE Composite and SP Funds
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and SP Funds 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 Funds 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 Funds SP, you can compare the effects of market volatilities on NYSE Composite and SP Funds 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 Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and SP Funds.
Diversification Opportunities for NYSE Composite and SP Funds
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between NYSE and SPUS is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and SP Funds SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SP Funds SP 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 Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SP Funds SP has no effect on the direction of NYSE Composite i.e., NYSE Composite and SP Funds go up and down completely randomly.
Pair Corralation between NYSE Composite and SP Funds
Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.62 times more return on investment than SP Funds. However, NYSE Composite is 1.61 times less risky than SP Funds. It trades about 0.26 of its potential returns per unit of risk. SP Funds SP is currently generating about 0.03 per unit of risk. If you would invest 1,945,669 in NYSE Composite on August 30, 2024 and sell it today you would earn a total of 75,313 from holding NYSE Composite or generate 3.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. SP Funds SP
Performance |
| Timeline |
NYSE Composite and SP Funds Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
SP Funds SP
Pair trading matchups for SP Funds
Pair Trading with NYSE Composite and SP Funds
The main advantage of trading using opposite NYSE Composite and SP Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, SP Funds 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 Funds will offset losses from the drop in SP Funds' long position.| NYSE Composite vs. Delek Drilling | NYSE Composite vs. Helmerich and Payne | NYSE Composite vs. Waste Management | NYSE Composite vs. US Global Investors |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
Other Complementary Tools
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets |