Correlation Between NYSE Composite and Utilities Select
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Utilities 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 Utilities 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 Utilities Select Sector, you can compare the effects of market volatilities on NYSE Composite and Utilities 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 Utilities Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Utilities Select.
Diversification Opportunities for NYSE Composite and Utilities Select
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NYSE and Utilities is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Utilities Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Utilities 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 Utilities Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Utilities Select Sector has no effect on the direction of NYSE Composite i.e., NYSE Composite and Utilities Select go up and down completely randomly.
Pair Corralation between NYSE Composite and Utilities Select
Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.7 times more return on investment than Utilities Select. However, NYSE Composite is 1.43 times less risky than Utilities Select. It trades about 0.07 of its potential returns per unit of risk. Utilities Select Sector is currently generating about 0.05 per unit of risk. If you would invest 1,547,479 in NYSE Composite on August 24, 2024 and sell it today you would earn a total of 449,351 from holding NYSE Composite or generate 29.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Utilities Select Sector
Performance |
| Timeline |
NYSE Composite and Utilities Select Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Utilities Select Sector
Pair trading matchups for Utilities Select
Pair Trading with NYSE Composite and Utilities Select
The main advantage of trading using opposite NYSE Composite and Utilities Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Utilities 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 Utilities Select will offset losses from the drop in Utilities Select's long position.| NYSE Composite vs. Awilco Drilling PLC | NYSE Composite vs. AKITA Drilling | NYSE Composite vs. SunOpta | NYSE Composite vs. Delek Drilling |
| Utilities Select vs. Consumer Staples Select | Utilities Select vs. Industrial Select Sector | Utilities Select vs. Materials Select Sector | Utilities Select vs. Health Care Select |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
Other Complementary Tools
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm |