Correlation Between NYSE Composite and Westwood Quality
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Westwood Quality 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 Westwood Quality into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Westwood Quality Smallcap, you can compare the effects of market volatilities on NYSE Composite and Westwood Quality 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 Westwood Quality. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Westwood Quality.
Diversification Opportunities for NYSE Composite and Westwood Quality
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NYSE and Westwood is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Westwood Quality Smallcap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westwood Quality Smallcap 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 Westwood Quality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westwood Quality Smallcap has no effect on the direction of NYSE Composite i.e., NYSE Composite and Westwood Quality go up and down completely randomly.
Pair Corralation between NYSE Composite and Westwood Quality
Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.54 times more return on investment than Westwood Quality. However, NYSE Composite is 1.87 times less risky than Westwood Quality. It trades about 0.14 of its potential returns per unit of risk. Westwood Quality Smallcap is currently generating about 0.06 per unit of risk. If you would invest 1,620,776 in NYSE Composite on September 3, 2024 and sell it today you would earn a total of 400,546 from holding NYSE Composite or generate 24.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Westwood Quality Smallcap
Performance |
| Timeline |
NYSE Composite and Westwood Quality Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Westwood Quality Smallcap
Pair trading matchups for Westwood Quality
Pair Trading with NYSE Composite and Westwood Quality
The main advantage of trading using opposite NYSE Composite and Westwood Quality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Westwood Quality 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 Westwood Quality will offset losses from the drop in Westwood Quality's long position.| NYSE Composite vs. Lindblad Expeditions Holdings | NYSE Composite vs. LB Foster | NYSE Composite vs. HUTCHMED DRC | NYSE Composite vs. Bridgford Foods |
| Westwood Quality vs. Deutsche Real Estate | Westwood Quality vs. Tiaa Cref Real Estate | Westwood Quality vs. Dunham Real Estate | Westwood Quality vs. Virtus Real Estate |
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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