Correlation Between NYSE Composite and Monteagle Select

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

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

Diversification Opportunities for NYSE Composite and Monteagle Select

0.72

Correlation Coefficient

NYSE Composite  Monteagle Select

Poor diversification

The 3 months correlation between NYSE and Monteagle is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Monteagle Select Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monteagle Select Value 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 Monteagle Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monteagle Select Value has no effect on the direction of NYSE Composite i.e., NYSE Composite and Monteagle Select go up and down completely randomly.

Pair Corralation between NYSE Composite and Monteagle Select

Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.9 times more return on investment than Monteagle Select. However, NYSE Composite is 1.11 times less risky than Monteagle Select. It trades about 0.06 of its potential returns per unit of risk. Monteagle Select Value is currently generating about 0.02 per unit of risk. If you would invest  1,577,755  in NYSE Composite on October 11, 2024 and sell it today you would earn a total of  346,319  from holding NYSE Composite or generate 21.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

NYSE Composite  vs.  Monteagle Select Value

Pair Trading with NYSE Composite and Monteagle Select

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

The idea behind NYSE Composite and Monteagle Select Value 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.