Correlation Between NYSE Composite and Ridgeworth Seix

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

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

Diversification Opportunities for NYSE Composite and Ridgeworth Seix

0.73

Correlation Coefficient

NYSE Composite  Ridgeworth Seix

Poor diversification

The 3 months correlation between NYSE and Ridgeworth is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Ridgeworth Seix High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ridgeworth Seix High 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 Ridgeworth Seix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ridgeworth Seix High has no effect on the direction of NYSE Composite i.e., NYSE Composite and Ridgeworth Seix go up and down completely randomly.

Pair Corralation between NYSE Composite and Ridgeworth Seix

Assuming the 90 days trading horizon NYSE Composite is expected to under-perform the Ridgeworth Seix. In addition to that, NYSE Composite is 3.77 times more volatile than Ridgeworth Seix High. It trades about -0.05 of its total potential returns per unit of risk. Ridgeworth Seix High is currently generating about 0.16 per unit of volatility. If you would invest  795.00  in Ridgeworth Seix High on September 18, 2024 and sell it today you would earn a total of  3.00  from holding Ridgeworth Seix High or generate 0.38% 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.  Ridgeworth Seix High

Pair Trading with NYSE Composite and Ridgeworth Seix

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

The idea behind NYSE Composite and Ridgeworth Seix High 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.