Correlation Between NYSE Composite and Vanguard Large-cap
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Vanguard Large-cap 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 Large-cap 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 Large Cap Index, you can compare the effects of market volatilities on NYSE Composite and Vanguard Large-cap 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 Large-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Vanguard Large-cap.
Diversification Opportunities for NYSE Composite and Vanguard Large-cap
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between NYSE and Vanguard is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Vanguard Large Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Large Cap 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 Large-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Large Cap has no effect on the direction of NYSE Composite i.e., NYSE Composite and Vanguard Large-cap go up and down completely randomly.
Pair Corralation between NYSE Composite and Vanguard Large-cap
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.66 times less return on investment than Vanguard Large-cap. But when comparing it to its historical volatility, NYSE Composite is 1.12 times less risky than Vanguard Large-cap. It trades about 0.08 of its potential returns per unit of risk. Vanguard Large Cap Index is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 36,971 in Vanguard Large Cap Index on September 3, 2024 and sell it today you would earn a total of 20,644 from holding Vanguard Large Cap Index or generate 55.84% 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 Large Cap Index
Performance |
| Timeline |
NYSE Composite and Vanguard Large-cap Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Vanguard Large Cap Index
Pair trading matchups for Vanguard Large-cap
Pair Trading with NYSE Composite and Vanguard Large-cap
The main advantage of trading using opposite NYSE Composite and Vanguard Large-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Vanguard Large-cap 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 Large-cap will offset losses from the drop in Vanguard Large-cap's long position.| NYSE Composite vs. Lindblad Expeditions Holdings | NYSE Composite vs. LB Foster | NYSE Composite vs. HUTCHMED DRC | NYSE Composite vs. Bridgford Foods |
| Vanguard Large-cap vs. Vanguard Total Stock | Vanguard Large-cap vs. Vanguard 500 Index | Vanguard Large-cap vs. Vanguard Total Stock | Vanguard Large-cap vs. Vanguard Total Stock |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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