Correlation Between NYSE Composite and Westwood Market
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Westwood Market 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 Market 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 Market Neutral, you can compare the effects of market volatilities on NYSE Composite and Westwood Market 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 Market. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Westwood Market.
Diversification Opportunities for NYSE Composite and Westwood Market
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NYSE and Westwood is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Westwood Market Neutral in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westwood Market Neutral 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 Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westwood Market Neutral has no effect on the direction of NYSE Composite i.e., NYSE Composite and Westwood Market go up and down completely randomly.
Pair Corralation between NYSE Composite and Westwood Market
Assuming the 90 days trading horizon NYSE Composite is expected to generate 6.77 times more return on investment than Westwood Market. However, NYSE Composite is 6.77 times more volatile than Westwood Market Neutral. It trades about 0.08 of its potential returns per unit of risk. Westwood Market Neutral is currently generating about 0.24 per unit of risk. If you would invest 1,546,867 in NYSE Composite on September 2, 2024 and sell it today you would earn a total of 480,337 from holding NYSE Composite or generate 31.05% 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 Market Neutral
Performance |
| Timeline |
NYSE Composite and Westwood Market Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Westwood Market Neutral
Pair trading matchups for Westwood Market
Pair Trading with NYSE Composite and Westwood Market
The main advantage of trading using opposite NYSE Composite and Westwood Market positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Westwood Market 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 Market will offset losses from the drop in Westwood Market's long position.| NYSE Composite vs. Simon Property Group | NYSE Composite vs. Merit Medical Systems | NYSE Composite vs. Catalent | NYSE Composite vs. Titan Machinery |
| Westwood Market vs. Inverse Government Long | Westwood Market vs. Franklin Adjustable Government | Westwood Market vs. Prudential Government Income | Westwood Market vs. Fidelity Series Government |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
Other Complementary Tools
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets |