Correlation Between NYSE Composite and Madison Covered
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Madison Covered 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 Madison Covered into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Madison Covered Call, you can compare the effects of market volatilities on NYSE Composite and Madison Covered 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 Madison Covered. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Madison Covered.
Diversification Opportunities for NYSE Composite and Madison Covered
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NYSE and Madison is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Madison Covered Call in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madison Covered Call 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 Madison Covered. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madison Covered Call has no effect on the direction of NYSE Composite i.e., NYSE Composite and Madison Covered go up and down completely randomly.
Pair Corralation between NYSE Composite and Madison Covered
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.4 times more return on investment than Madison Covered. However, NYSE Composite is 1.4 times more volatile than Madison Covered Call. It trades about 0.28 of its potential returns per unit of risk. Madison Covered Call is currently generating about 0.05 per unit of risk. If you would invest 1,925,429 in NYSE Composite on November 4, 2024 and sell it today you would earn a total of 74,453 from holding NYSE Composite or generate 3.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Madison Covered Call
Performance |
| Timeline |
NYSE Composite and Madison Covered Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Madison Covered Call
Pair trading matchups for Madison Covered
Pair Trading with NYSE Composite and Madison Covered
The main advantage of trading using opposite NYSE Composite and Madison Covered positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Madison Covered 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 Madison Covered will offset losses from the drop in Madison Covered's long position.| NYSE Composite vs. Aris Water Solutions | NYSE Composite vs. Marfrig Global Foods | NYSE Composite vs. CenterPoint Energy | NYSE Composite vs. Sysco |
| Madison Covered vs. Columbia Global Technology | Madison Covered vs. Vanguard Information Technology | Madison Covered vs. Putnam Global Technology | Madison Covered vs. Columbia Global Technology |
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 CEOs Directory module to screen CEOs from public companies around the world.
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