Correlation Between NYSE Composite and SPDR Bloomberg

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

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

Diversification Opportunities for NYSE Composite and SPDR Bloomberg

-0.38

Correlation Coefficient

NYSE Composite  SPDR Bloomberg

Very good diversification

The 3 months correlation between NYSE and SPDR is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and SPDR Bloomberg International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Bloomberg Inter 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 SPDR Bloomberg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Bloomberg Inter has no effect on the direction of NYSE Composite i.e., NYSE Composite and SPDR Bloomberg go up and down completely randomly.

Pair Corralation between NYSE Composite and SPDR Bloomberg

Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.31 times more return on investment than SPDR Bloomberg. However, NYSE Composite is 1.31 times more volatile than SPDR Bloomberg International. It trades about 0.07 of its potential returns per unit of risk. SPDR Bloomberg International is currently generating about 0.03 per unit of risk. If you would invest  1,515,445  in NYSE Composite on September 21, 2024 and sell it today you would earn a total of  380,376  from holding NYSE Composite or generate 25.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

NYSE Composite  vs.  SPDR Bloomberg International

Pair Trading with NYSE Composite and SPDR Bloomberg

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

The idea behind NYSE Composite and SPDR Bloomberg International 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.