Correlation Between NYSE Composite and Wahed Dow
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Wahed Dow 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 Wahed Dow into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Wahed Dow Jones, you can compare the effects of market volatilities on NYSE Composite and Wahed Dow 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 Wahed Dow. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Wahed Dow.
Diversification Opportunities for NYSE Composite and Wahed Dow
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NYSE and Wahed is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Wahed Dow Jones in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wahed Dow Jones 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 Wahed Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wahed Dow Jones has no effect on the direction of NYSE Composite i.e., NYSE Composite and Wahed Dow go up and down completely randomly.
Pair Corralation between NYSE Composite and Wahed Dow
Assuming the 90 days trading horizon NYSE Composite is expected to generate 2.22 times less return on investment than Wahed Dow. But when comparing it to its historical volatility, NYSE Composite is 1.98 times less risky than Wahed Dow. It trades about 0.21 of its potential returns per unit of risk. Wahed Dow Jones is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 2,423 in Wahed Dow Jones on November 18, 2024 and sell it today you would earn a total of 144.00 from holding Wahed Dow Jones or generate 5.94% 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. Wahed Dow Jones
Performance |
| Timeline |
NYSE Composite and Wahed Dow Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Wahed Dow Jones
Pair trading matchups for Wahed Dow
Pair Trading with NYSE Composite and Wahed Dow
The main advantage of trading using opposite NYSE Composite and Wahed Dow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Wahed Dow 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 Wahed Dow will offset losses from the drop in Wahed Dow's long position.| NYSE Composite vs. Zhihu Inc ADR | NYSE Composite vs. Allied Gaming Entertainment | NYSE Composite vs. Asure Software | NYSE Composite vs. SohuCom |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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