Correlation Between NYSE Composite and Retailing Fund

Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Retailing 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 Retailing 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 Retailing Fund Class, you can compare the effects of market volatilities on NYSE Composite and Retailing 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 Retailing Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Retailing Fund.

Diversification Opportunities for NYSE Composite and Retailing Fund

0.69

Correlation Coefficient

NYSE Composite  Retailing Fund

Poor diversification

The 3 months correlation between NYSE and Retailing is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Retailing Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Retailing Fund Class 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 Retailing Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Retailing Fund Class has no effect on the direction of NYSE Composite i.e., NYSE Composite and Retailing Fund go up and down completely randomly.

Pair Corralation between NYSE Composite and Retailing Fund

Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.73 times more return on investment than Retailing Fund. However, NYSE Composite is 1.37 times less risky than Retailing Fund. It trades about 0.03 of its potential returns per unit of risk. Retailing Fund Class is currently generating about -0.1 per unit of risk. If you would invest  1,920,711  in NYSE Composite on December 22, 2024 and sell it today you would earn a total of  24,719  from holding NYSE Composite or generate 1.29% 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.  Retailing Fund Class

Pair Trading with NYSE Composite and Retailing Fund

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

The idea behind NYSE Composite and Retailing Fund Class 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.