Correlation Between NYSE Composite and Sequoia Fund

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

Diversification Opportunities for NYSE Composite and Sequoia Fund

0.77

Correlation Coefficient

NYSE Composite  Sequoia Fund

Poor diversification

The 3 months correlation between NYSE and Sequoia is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Sequoia Fund Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sequoia Fund 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 Sequoia Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sequoia Fund has no effect on the direction of NYSE Composite i.e., NYSE Composite and Sequoia Fund go up and down completely randomly.

Pair Corralation between NYSE Composite and Sequoia Fund

Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.9 times less return on investment than Sequoia Fund. But when comparing it to its historical volatility, NYSE Composite is 1.16 times less risky than Sequoia Fund. It trades about 0.06 of its potential returns per unit of risk. Sequoia Fund Inc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  12,536  in Sequoia Fund Inc on October 11, 2024 and sell it today you would earn a total of  5,910  from holding Sequoia Fund Inc or generate 47.14% 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.  Sequoia Fund Inc

Pair Trading with NYSE Composite and Sequoia Fund

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

The idea behind NYSE Composite and Sequoia Fund Inc 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.