Correlation Between NYSE Composite and SXP
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and SXP 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 SXP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and SXP, you can compare the effects of market volatilities on NYSE Composite and SXP 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 SXP. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and SXP.
Diversification Opportunities for NYSE Composite and SXP
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NYSE and SXP is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and SXP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SXP 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 SXP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SXP has no effect on the direction of NYSE Composite i.e., NYSE Composite and SXP go up and down completely randomly.
Pair Corralation between NYSE Composite and SXP
Assuming the 90 days trading horizon NYSE Composite is expected to generate 22.59 times less return on investment than SXP. But when comparing it to its historical volatility, NYSE Composite is 12.62 times less risky than SXP. It trades about 0.13 of its potential returns per unit of risk. SXP is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 25.00 in SXP on August 24, 2024 and sell it today you would earn a total of 11.00 from holding SXP or generate 44.0% 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. SXP
Performance |
| Timeline |
NYSE Composite and SXP Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
SXP
Pair trading matchups for SXP
Pair Trading with NYSE Composite and SXP
The main advantage of trading using opposite NYSE Composite and SXP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, SXP 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 SXP will offset losses from the drop in SXP's long position.| NYSE Composite vs. Awilco Drilling PLC | NYSE Composite vs. AKITA Drilling | NYSE Composite vs. SunOpta | NYSE Composite vs. Delek Drilling |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
Other Complementary Tools
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum |