Correlation Between NYSE Composite and Trex
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Trex 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 Trex into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Trex Company, you can compare the effects of market volatilities on NYSE Composite and Trex 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 Trex. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Trex.
Diversification Opportunities for NYSE Composite and Trex
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NYSE and Trex is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Trex Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trex Company 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 Trex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trex Company has no effect on the direction of NYSE Composite i.e., NYSE Composite and Trex go up and down completely randomly.
Pair Corralation between NYSE Composite and Trex
Assuming the 90 days trading horizon NYSE Composite is expected to generate 4.52 times less return on investment than Trex. But when comparing it to its historical volatility, NYSE Composite is 3.79 times less risky than Trex. It trades about 0.24 of its potential returns per unit of risk. Trex Company is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 6,651 in Trex Company on August 28, 2024 and sell it today you would earn a total of 1,059 from holding Trex Company or generate 15.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Trex Company
Performance |
| Timeline |
NYSE Composite and Trex Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Trex Company
Pair trading matchups for Trex
Pair Trading with NYSE Composite and Trex
The main advantage of trading using opposite NYSE Composite and Trex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Trex 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 Trex will offset losses from the drop in Trex's long position.| NYSE Composite vs. Hooker Furniture | NYSE Composite vs. Hudson Pacific Properties | NYSE Composite vs. Canlan Ice Sports | NYSE Composite vs. Boston Properties |
| Trex vs. Quanex Building Products | Trex vs. Armstrong World Industries | Trex vs. Gibraltar Industries | Trex vs. Apogee Enterprises |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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