Correlation Between NYSE Composite and STRAX
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and STRAX 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 STRAX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and STRAX, you can compare the effects of market volatilities on NYSE Composite and STRAX 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 STRAX. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and STRAX.
Diversification Opportunities for NYSE Composite and STRAX
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NYSE and STRAX is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and STRAX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STRAX 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 STRAX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STRAX has no effect on the direction of NYSE Composite i.e., NYSE Composite and STRAX go up and down completely randomly.
Pair Corralation between NYSE Composite and STRAX
Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.11 times more return on investment than STRAX. However, NYSE Composite is 9.14 times less risky than STRAX. It trades about 0.08 of its potential returns per unit of risk. STRAX is currently generating about -0.03 per unit of risk. If you would invest 1,529,105 in NYSE Composite on August 30, 2024 and sell it today you would earn a total of 491,877 from holding NYSE Composite or generate 32.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 60.28% |
| Values | Daily Returns |
NYSE Composite vs. STRAX
Performance |
| Timeline |
NYSE Composite and STRAX Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
STRAX
Pair trading matchups for STRAX
Pair Trading with NYSE Composite and STRAX
The main advantage of trading using opposite NYSE Composite and STRAX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, STRAX 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 STRAX will offset losses from the drop in STRAX's 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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