Correlation Between NYSE Composite and Wasatch Long/short
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Wasatch Long/short 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 Wasatch Long/short into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Wasatch Longshort Alpha, you can compare the effects of market volatilities on NYSE Composite and Wasatch Long/short 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 Wasatch Long/short. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Wasatch Long/short.
Diversification Opportunities for NYSE Composite and Wasatch Long/short
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NYSE and Wasatch is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Wasatch Longshort Alpha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wasatch Longshort Alpha 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 Wasatch Long/short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wasatch Longshort Alpha has no effect on the direction of NYSE Composite i.e., NYSE Composite and Wasatch Long/short go up and down completely randomly.
Pair Corralation between NYSE Composite and Wasatch Long/short
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.4 times less return on investment than Wasatch Long/short. But when comparing it to its historical volatility, NYSE Composite is 1.16 times less risky than Wasatch Long/short. It trades about 0.08 of its potential returns per unit of risk. Wasatch Longshort Alpha is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,058 in Wasatch Longshort Alpha on September 3, 2024 and sell it today you would earn a total of 473.00 from holding Wasatch Longshort Alpha or generate 44.71% 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. Wasatch Longshort Alpha
Performance |
| Timeline |
NYSE Composite and Wasatch Long/short Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Wasatch Longshort Alpha
Pair trading matchups for Wasatch Long/short
Pair Trading with NYSE Composite and Wasatch Long/short
The main advantage of trading using opposite NYSE Composite and Wasatch Long/short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Wasatch Long/short 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 Wasatch Long/short will offset losses from the drop in Wasatch Long/short's long position.| NYSE Composite vs. Lindblad Expeditions Holdings | NYSE Composite vs. LB Foster | NYSE Composite vs. HUTCHMED DRC | NYSE Composite vs. Bridgford Foods |
| Wasatch Long/short vs. Fundamental Large Cap | Wasatch Long/short vs. Pace Large Value | Wasatch Long/short vs. Avantis Large Cap | Wasatch Long/short vs. Touchstone Large Cap |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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