Correlation Between NYSE Composite and Technology Select
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Technology Select 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 Technology Select into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Technology Select Sector, you can compare the effects of market volatilities on NYSE Composite and Technology Select 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 Technology Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Technology Select.
Diversification Opportunities for NYSE Composite and Technology Select
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between NYSE and Technology is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Technology Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Technology Select Sector 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 Technology Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Technology Select Sector has no effect on the direction of NYSE Composite i.e., NYSE Composite and Technology Select go up and down completely randomly.
Pair Corralation between NYSE Composite and Technology Select
Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.49 times more return on investment than Technology Select. However, NYSE Composite is 2.02 times less risky than Technology Select. It trades about 0.21 of its potential returns per unit of risk. Technology Select Sector is currently generating about 0.06 per unit of risk. If you would invest 1,954,967 in NYSE Composite on August 27, 2024 and sell it today you would earn a total of 57,378 from holding NYSE Composite or generate 2.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Technology Select Sector
Performance |
| Timeline |
NYSE Composite and Technology Select Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Technology Select Sector
Pair trading matchups for Technology Select
Pair Trading with NYSE Composite and Technology Select
The main advantage of trading using opposite NYSE Composite and Technology Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Technology Select 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 Technology Select will offset losses from the drop in Technology Select's long position.| NYSE Composite vs. Hooker Furniture | NYSE Composite vs. Hudson Pacific Properties | NYSE Composite vs. Canlan Ice Sports | NYSE Composite vs. Boston Properties |
| Technology Select vs. First Trust Exchange Traded | Technology Select vs. Ultimus Managers Trust | Technology Select vs. Horizon Kinetics Medical | Technology Select vs. Harbor Health Care |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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