Correlation Between NYSE Composite and Severn Trent
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Severn Trent 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 Severn Trent into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Severn Trent PLC, you can compare the effects of market volatilities on NYSE Composite and Severn Trent 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 Severn Trent. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Severn Trent.
Diversification Opportunities for NYSE Composite and Severn Trent
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NYSE and Severn is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Severn Trent PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Severn Trent PLC 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 Severn Trent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Severn Trent PLC has no effect on the direction of NYSE Composite i.e., NYSE Composite and Severn Trent go up and down completely randomly.
Pair Corralation between NYSE Composite and Severn Trent
Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.38 times more return on investment than Severn Trent. However, NYSE Composite is 2.64 times less risky than Severn Trent. It trades about 0.04 of its potential returns per unit of risk. Severn Trent PLC is currently generating about 0.0 per unit of risk. If you would invest 1,493,110 in NYSE Composite on February 1, 2024 and sell it today you would earn a total of 267,224 from holding NYSE Composite or generate 17.9% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 73.28% |
Values | Daily Returns |
NYSE Composite vs. Severn Trent PLC
Performance |
Timeline |
NYSE Composite and Severn Trent Volatility Contrast
Predicted Return Density |
Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Severn Trent PLC
Pair trading matchups for Severn Trent
Pair Trading with NYSE Composite and Severn Trent
The main advantage of trading using opposite NYSE Composite and Severn Trent positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Severn Trent 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 Severn Trent will offset losses from the drop in Severn Trent's long position.NYSE Composite vs. CECO Environmental Corp | NYSE Composite vs. Air Lease | NYSE Composite vs. Artisan Partners Asset | NYSE Composite vs. Iris Acquisition Corp |
Severn Trent vs. Essential Utilities | Severn Trent vs. Anhui Conch Cement | Severn Trent vs. Beijing Enterprises Water | Severn Trent vs. Endesa SA ADR |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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