Correlation Between NYSE Composite and Heating Oil
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Heating Oil 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 Heating Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Heating Oil, you can compare the effects of market volatilities on NYSE Composite and Heating Oil 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 Heating Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Heating Oil.
Diversification Opportunities for NYSE Composite and Heating Oil
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NYSE and Heating is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Heating Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heating Oil 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 Heating Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heating Oil has no effect on the direction of NYSE Composite i.e., NYSE Composite and Heating Oil go up and down completely randomly.
Pair Corralation between NYSE Composite and Heating Oil
Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.39 times more return on investment than Heating Oil. However, NYSE Composite is 2.55 times less risky than Heating Oil. It trades about 0.03 of its potential returns per unit of risk. Heating Oil is currently generating about -0.03 per unit of risk. If you would invest 1,584,845 in NYSE Composite on February 26, 2024 and sell it today you would earn a total of 226,215 from holding NYSE Composite or generate 14.27% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 96.88% |
Values | Daily Returns |
NYSE Composite vs. Heating Oil
Performance |
Timeline |
NYSE Composite and Heating Oil Volatility Contrast
Predicted Return Density |
Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Heating Oil
Pair trading matchups for Heating Oil
Pair Trading with NYSE Composite and Heating Oil
The main advantage of trading using opposite NYSE Composite and Heating Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Heating Oil 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 Heating Oil will offset losses from the drop in Heating Oil's long position.NYSE Composite vs. Willscot Mobile Mini | NYSE Composite vs. United States Steel | NYSE Composite vs. Federal Home Loan | NYSE Composite vs. Highway Holdings Limited |
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Check out your portfolio center.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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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