Correlation Between NYSE Composite and Wilshire 5000
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Wilshire 5000 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 Wilshire 5000 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Wilshire 5000 Index, you can compare the effects of market volatilities on NYSE Composite and Wilshire 5000 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 Wilshire 5000. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Wilshire 5000.
Diversification Opportunities for NYSE Composite and Wilshire 5000
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NYSE and Wilshire is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Wilshire 5000 Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wilshire 5000 Index 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 Wilshire 5000. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wilshire 5000 Index has no effect on the direction of NYSE Composite i.e., NYSE Composite and Wilshire 5000 go up and down completely randomly.
Pair Corralation between NYSE Composite and Wilshire 5000
Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.81 times more return on investment than Wilshire 5000. However, NYSE Composite is 1.23 times less risky than Wilshire 5000. It trades about 0.24 of its potential returns per unit of risk. Wilshire 5000 Index is currently generating about 0.1 per unit of risk. If you would invest 1,936,450 in NYSE Composite on October 26, 2024 and sell it today you would earn a total of 63,297 from holding NYSE Composite or generate 3.27% 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. Wilshire 5000 Index
Performance |
| Timeline |
NYSE Composite and Wilshire 5000 Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Wilshire 5000 Index
Pair trading matchups for Wilshire 5000
Pair Trading with NYSE Composite and Wilshire 5000
The main advantage of trading using opposite NYSE Composite and Wilshire 5000 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Wilshire 5000 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 Wilshire 5000 will offset losses from the drop in Wilshire 5000's long position.| NYSE Composite vs. Lindblad Expeditions Holdings | NYSE Composite vs. Proficient Auto Logistics, | NYSE Composite vs. Hafnia Limited | NYSE Composite vs. Arm Holdings plc |
| Wilshire 5000 vs. Calvert Moderate Allocation | Wilshire 5000 vs. College Retirement Equities | Wilshire 5000 vs. Voya Retirement Moderate | Wilshire 5000 vs. Franklin Lifesmart Retirement |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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