Correlation Between NYSE Composite and XDN
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and XDN 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 XDN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and XDN, you can compare the effects of market volatilities on NYSE Composite and XDN 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 XDN. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and XDN.
Diversification Opportunities for NYSE Composite and XDN
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NYSE and XDN is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and XDN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XDN 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 XDN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XDN has no effect on the direction of NYSE Composite i.e., NYSE Composite and XDN go up and down completely randomly.
Pair Corralation between NYSE Composite and XDN
Assuming the 90 days trading horizon NYSE Composite is expected to generate 25.49 times less return on investment than XDN. But when comparing it to its historical volatility, NYSE Composite is 26.15 times less risky than XDN. It trades about 0.08 of its potential returns per unit of risk. XDN is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 0.01 in XDN on August 30, 2024 and sell it today you would lose 0.00 from holding XDN or give up 43.42% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 60.28% |
| Values | Daily Returns |
NYSE Composite vs. XDN
Performance |
| Timeline |
NYSE Composite and XDN Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
XDN
Pair trading matchups for XDN
Pair Trading with NYSE Composite and XDN
The main advantage of trading using opposite NYSE Composite and XDN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, XDN 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 XDN will offset losses from the drop in XDN'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 |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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