Correlation Between NYSE Composite and Defensive Market
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Defensive Market 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 Defensive Market into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Defensive Market Strategies, you can compare the effects of market volatilities on NYSE Composite and Defensive Market 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 Defensive Market. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Defensive Market.
Diversification Opportunities for NYSE Composite and Defensive Market
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NYSE and Defensive is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Defensive Market Strategies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Defensive Market Str 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 Defensive Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Defensive Market Str has no effect on the direction of NYSE Composite i.e., NYSE Composite and Defensive Market go up and down completely randomly.
Pair Corralation between NYSE Composite and Defensive Market
Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.81 times more return on investment than Defensive Market. However, NYSE Composite is 1.24 times less risky than Defensive Market. It trades about -0.07 of its potential returns per unit of risk. Defensive Market Strategies is currently generating about -0.12 per unit of risk. If you would invest 2,015,744 in NYSE Composite on December 5, 2024 and sell it today you would lose (66,189) from holding NYSE Composite or give up 3.28% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
NYSE Composite vs. Defensive Market Strategies
Performance |
Timeline |
NYSE Composite and Defensive Market Volatility Contrast
Predicted Return Density |
Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Defensive Market Strategies
Pair trading matchups for Defensive Market
Pair Trading with NYSE Composite and Defensive Market
The main advantage of trading using opposite NYSE Composite and Defensive Market positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Defensive Market 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 Defensive Market will offset losses from the drop in Defensive Market's long position.NYSE Composite vs. Triton International Limited | NYSE Composite vs. Mitsubishi UFJ Lease | NYSE Composite vs. Global E Online | NYSE Composite vs. Federal Home Loan |
Defensive Market vs. Siit High Yield | Defensive Market vs. Pioneer High Income | Defensive Market vs. Msift High Yield | Defensive Market vs. Intal High Relative |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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