Correlation Between NYSE Composite and Sekisui House

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

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

Diversification Opportunities for NYSE Composite and Sekisui House

-0.61

Correlation Coefficient

NYSE Composite  Sekisui House

Excellent diversification

The 3 months correlation between NYSE and Sekisui is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Sekisui House Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sekisui House 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 Sekisui House. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sekisui House has no effect on the direction of NYSE Composite i.e., NYSE Composite and Sekisui House go up and down completely randomly.

Pair Corralation between NYSE Composite and Sekisui House

Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.39 times more return on investment than Sekisui House. However, NYSE Composite is 2.58 times less risky than Sekisui House. It trades about 0.12 of its potential returns per unit of risk. Sekisui House Ltd is currently generating about -0.12 per unit of risk. If you would invest  1,912,150  in NYSE Composite on September 13, 2024 and sell it today you would earn a total of  76,953  from holding NYSE Composite or generate 4.02% return on investment over 90 days.

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

NYSE Composite  vs.  Sekisui House Ltd

Pair Trading with NYSE Composite and Sekisui House

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

The idea behind NYSE Composite and Sekisui House Ltd 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.