Correlation Between NYSE Composite and American Funds
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and American 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 American 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 American Funds Tax Exempt, you can compare the effects of market volatilities on NYSE Composite and American 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 American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and American Funds.
Diversification Opportunities for NYSE Composite and American Funds
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between NYSE and American is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and American Funds Tax Exempt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Tax 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 American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Tax has no effect on the direction of NYSE Composite i.e., NYSE Composite and American Funds go up and down completely randomly.
Pair Corralation between NYSE Composite and American Funds
Assuming the 90 days trading horizon NYSE Composite is expected to generate 5.9 times more return on investment than American Funds. However, NYSE Composite is 5.9 times more volatile than American Funds Tax Exempt. It trades about 0.08 of its potential returns per unit of risk. American Funds Tax Exempt is currently generating about 0.09 per unit of risk. If you would invest 1,532,846 in NYSE Composite on August 27, 2024 and sell it today you would earn a total of 479,499 from holding NYSE Composite or generate 31.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. American Funds Tax Exempt
Performance |
| Timeline |
NYSE Composite and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
American Funds Tax Exempt
Pair trading matchups for American Funds
Pair Trading with NYSE Composite and American Funds
The main advantage of trading using opposite NYSE Composite and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, American 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 American Funds will offset losses from the drop in American Funds' long position.| NYSE Composite vs. Hooker Furniture | NYSE Composite vs. Hudson Pacific Properties | NYSE Composite vs. Canlan Ice Sports | NYSE Composite vs. Boston Properties |
| American Funds vs. American Funds Growth | American Funds vs. American Funds Preservation | American Funds vs. American Funds Balanced | American Funds vs. American Funds Income |
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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