Correlation Between NYSE Composite and American Funds
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and American Funds 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 American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and American Funds Mortgage, you can compare the effects of market volatilities on NYSE Composite and American Funds 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 American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and American Funds.
Diversification Opportunities for NYSE Composite and American Funds
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NYSE and American is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and American Funds Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Mortgage 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 American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Mortgage has no effect on the direction of NYSE Composite i.e., NYSE Composite and American Funds go up and down completely randomly.
Pair Corralation between NYSE Composite and American Funds
Assuming the 90 days trading horizon NYSE Composite is expected to under-perform the American Funds. In addition to that, NYSE Composite is 1.47 times more volatile than American Funds Mortgage. It trades about -0.03 of its total potential returns per unit of risk. American Funds Mortgage is currently generating about -0.03 per unit of volatility. If you would invest 852.00 in American Funds Mortgage on March 6, 2024 and sell it today you would lose (5.00) from holding American Funds Mortgage or give up 0.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. American Funds Mortgage
Performance |
| Timeline |
NYSE Composite and American Funds Volatility Contrast
Predicted Return Density |
| Returns |