Correlation Between NYSE Composite and US Bancorp
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and US Bancorp 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 US Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and US Bancorp, you can compare the effects of market volatilities on NYSE Composite and US Bancorp 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 US Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and US Bancorp.
Diversification Opportunities for NYSE Composite and US Bancorp
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NYSE and USB is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and US Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Bancorp 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 US Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Bancorp has no effect on the direction of NYSE Composite i.e., NYSE Composite and US Bancorp go up and down completely randomly.
Pair Corralation between NYSE Composite and US Bancorp
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.32 times less return on investment than US Bancorp. But when comparing it to its historical volatility, NYSE Composite is 2.87 times less risky than US Bancorp. It trades about 0.07 of its potential returns per unit of risk. US Bancorp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 4,128 in US Bancorp on August 23, 2024 and sell it today you would earn a total of 1,011 from holding US Bancorp or generate 24.49% 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. US Bancorp
Performance |
| Timeline |
NYSE Composite and US Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
US Bancorp
Pair trading matchups for US Bancorp
Pair Trading with NYSE Composite and US Bancorp
The main advantage of trading using opposite NYSE Composite and US Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, US Bancorp 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 US Bancorp will offset losses from the drop in US Bancorp's long position.| NYSE Composite vs. Akanda Corp | NYSE Composite vs. Valneva SE ADR | NYSE Composite vs. Radcom | NYSE Composite vs. Western Digital |
| US Bancorp vs. PNC Financial Services | US Bancorp vs. KeyCorp | US Bancorp vs. Zions Bancorporation | US Bancorp vs. Fifth Third Bancorp |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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