Correlation Between NYSE Composite and Eaton Vance

Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Eaton Vance 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 Eaton Vance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NYSE Composite and Eaton Vance Income, you can compare the effects of market volatilities on NYSE Composite and Eaton Vance 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 Eaton Vance. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Eaton Vance.

Diversification Opportunities for NYSE Composite and Eaton Vance

0.64

Correlation Coefficient

NYSE Composite  Eaton Vance

Poor diversification

The 3 months correlation between NYSE and Eaton is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Eaton Vance Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton Vance Income 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 Eaton Vance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eaton Vance Income has no effect on the direction of NYSE Composite i.e., NYSE Composite and Eaton Vance go up and down completely randomly.

Pair Corralation between NYSE Composite and Eaton Vance

Assuming the 90 days trading horizon NYSE Composite is expected to generate 3.44 times more return on investment than Eaton Vance. However, NYSE Composite is 3.44 times more volatile than Eaton Vance Income. It trades about 0.08 of its potential returns per unit of risk. Eaton Vance Income is currently generating about 0.12 per unit of risk. If you would invest  1,700,478  in NYSE Composite on October 2, 2024 and sell it today you would earn a total of  207,315  from holding NYSE Composite or generate 12.19% 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.  Eaton Vance Income

Pair Trading with NYSE Composite and Eaton Vance

The main advantage of trading using opposite NYSE Composite and Eaton Vance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Eaton Vance 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 Eaton Vance will offset losses from the drop in Eaton Vance's long position.

The idea behind NYSE Composite and Eaton Vance Income pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.