Correlation Between NYSE Composite and Muhlenkamp Fund

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

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

Diversification Opportunities for NYSE Composite and Muhlenkamp Fund

0.92

Correlation Coefficient

NYSE Composite  Muhlenkamp Fund

Almost no diversification

The 3 months correlation between NYSE and Muhlenkamp is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Muhlenkamp Fund Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Muhlenkamp Fund Inst 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 Muhlenkamp Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Muhlenkamp Fund Inst has no effect on the direction of NYSE Composite i.e., NYSE Composite and Muhlenkamp Fund go up and down completely randomly.

Pair Corralation between NYSE Composite and Muhlenkamp Fund

Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.14 times less return on investment than Muhlenkamp Fund. But when comparing it to its historical volatility, NYSE Composite is 1.25 times less risky than Muhlenkamp Fund. It trades about 0.17 of its potential returns per unit of risk. Muhlenkamp Fund Institutional is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  6,966  in Muhlenkamp Fund Institutional on September 4, 2024 and sell it today you would earn a total of  507.00  from holding Muhlenkamp Fund Institutional or generate 7.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

NYSE Composite  vs.  Muhlenkamp Fund Institutional

Pair Trading with NYSE Composite and Muhlenkamp Fund

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

The idea behind NYSE Composite and Muhlenkamp Fund Institutional 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.