Correlation Between NYSE Composite and Vanguard Extended
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Vanguard Extended 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 Vanguard Extended into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Vanguard Extended Market, you can compare the effects of market volatilities on NYSE Composite and Vanguard Extended 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 Vanguard Extended. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Vanguard Extended.
Diversification Opportunities for NYSE Composite and Vanguard Extended
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between NYSE and Vanguard is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Vanguard Extended Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Extended Market 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 Vanguard Extended. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Extended Market has no effect on the direction of NYSE Composite i.e., NYSE Composite and Vanguard Extended go up and down completely randomly.
Pair Corralation between NYSE Composite and Vanguard Extended
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.37 times less return on investment than Vanguard Extended. But when comparing it to its historical volatility, NYSE Composite is 1.71 times less risky than Vanguard Extended. It trades about 0.14 of its potential returns per unit of risk. Vanguard Extended Market is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 11,466 in Vanguard Extended Market on September 2, 2024 and sell it today you would earn a total of 4,081 from holding Vanguard Extended Market or generate 35.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Vanguard Extended Market
Performance |
| Timeline |
NYSE Composite and Vanguard Extended Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Vanguard Extended Market
Pair trading matchups for Vanguard Extended
Pair Trading with NYSE Composite and Vanguard Extended
The main advantage of trading using opposite NYSE Composite and Vanguard Extended positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Vanguard Extended 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 Vanguard Extended will offset losses from the drop in Vanguard Extended's long position.| NYSE Composite vs. Simon Property Group | NYSE Composite vs. Merit Medical Systems | NYSE Composite vs. Catalent | NYSE Composite vs. Titan Machinery |
| Vanguard Extended vs. Vanguard Total International | Vanguard Extended vs. Vanguard Total Bond | Vanguard Extended vs. Vanguard Value Index | Vanguard Extended vs. Vanguard Growth Index |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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