Correlation Between NYSE Composite and Teton Westwood

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

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

Diversification Opportunities for NYSE Composite and Teton Westwood

-0.15

Correlation Coefficient

NYSE Composite  Teton Westwood

Good diversification

The 3 months correlation between NYSE and Teton is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Teton Westwood Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teton Westwood Balanced 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 Teton Westwood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teton Westwood Balanced has no effect on the direction of NYSE Composite i.e., NYSE Composite and Teton Westwood go up and down completely randomly.

Pair Corralation between NYSE Composite and Teton Westwood

Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.27 times more return on investment than Teton Westwood. However, NYSE Composite is 1.27 times more volatile than Teton Westwood Balanced. It trades about 0.08 of its potential returns per unit of risk. Teton Westwood Balanced is currently generating about 0.05 per unit of risk. If you would invest  1,521,826  in NYSE Composite on September 14, 2024 and sell it today you would earn a total of  455,083  from holding NYSE Composite or generate 29.9% return on investment over 90 days.

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

NYSE Composite  vs.  Teton Westwood Balanced

Pair Trading with NYSE Composite and Teton Westwood

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

The idea behind NYSE Composite and Teton Westwood Balanced 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.