Correlation Between NYSE Composite and Short-term Municipal
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Short-term Municipal 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 Short-term Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Short Term Municipal Bond, you can compare the effects of market volatilities on NYSE Composite and Short-term Municipal 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 Short-term Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Short-term Municipal.
Diversification Opportunities for NYSE Composite and Short-term Municipal
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between NYSE and Short-term is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Short Term Municipal Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Term Municipal 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 Short-term Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Term Municipal has no effect on the direction of NYSE Composite i.e., NYSE Composite and Short-term Municipal go up and down completely randomly.
Pair Corralation between NYSE Composite and Short-term Municipal
Assuming the 90 days trading horizon NYSE Composite is expected to generate 6.51 times more return on investment than Short-term Municipal. However, NYSE Composite is 6.51 times more volatile than Short Term Municipal Bond. It trades about 0.27 of its potential returns per unit of risk. Short Term Municipal Bond is currently generating about 0.19 per unit of risk. If you would invest 1,945,669 in NYSE Composite on August 30, 2024 and sell it today you would earn a total of 75,313 from holding NYSE Composite or generate 3.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Short Term Municipal Bond
Performance |
| Timeline |
NYSE Composite and Short-term Municipal Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Short Term Municipal Bond
Pair trading matchups for Short-term Municipal
Pair Trading with NYSE Composite and Short-term Municipal
The main advantage of trading using opposite NYSE Composite and Short-term Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Short-term Municipal 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 Short-term Municipal will offset losses from the drop in Short-term Municipal's long position.| NYSE Composite vs. Delek Drilling | NYSE Composite vs. Helmerich and Payne | NYSE Composite vs. Waste Management | NYSE Composite vs. US Global Investors |
| Short-term Municipal vs. Adams Diversified Equity | Short-term Municipal vs. Pgim Jennison Diversified | Short-term Municipal vs. Massmutual Premier Diversified | Short-term Municipal vs. Wasatch Small 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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