Correlation Between NYSE Composite and Vanguard Momentum
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Vanguard Momentum 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 Vanguard Momentum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Vanguard Momentum Factor, you can compare the effects of market volatilities on NYSE Composite and Vanguard Momentum 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 Vanguard Momentum. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Vanguard Momentum.
Diversification Opportunities for NYSE Composite and Vanguard Momentum
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between NYSE and Vanguard is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Vanguard Momentum Factor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Momentum Factor 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 Vanguard Momentum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Momentum Factor has no effect on the direction of NYSE Composite i.e., NYSE Composite and Vanguard Momentum go up and down completely randomly.
Pair Corralation between NYSE Composite and Vanguard Momentum
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.55 times less return on investment than Vanguard Momentum. But when comparing it to its historical volatility, NYSE Composite is 1.43 times less risky than Vanguard Momentum. It trades about 0.06 of its potential returns per unit of risk. Vanguard Momentum Factor is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 11,547 in Vanguard Momentum Factor on January 30, 2024 and sell it today you would earn a total of 2,885 from holding Vanguard Momentum Factor or generate 24.98% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
NYSE Composite vs. Vanguard Momentum Factor
Performance |
Timeline |
NYSE Composite and Vanguard Momentum Volatility Contrast
Predicted Return Density |
Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Vanguard Momentum Factor
Pair trading matchups for Vanguard Momentum
Pair Trading with NYSE Composite and Vanguard Momentum
The main advantage of trading using opposite NYSE Composite and Vanguard Momentum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Vanguard Momentum 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 Vanguard Momentum will offset losses from the drop in Vanguard Momentum's long position.NYSE Composite vs. American Eagle Outfitters | NYSE Composite vs. Royal Bank of | NYSE Composite vs. Teleflex Incorporated | NYSE Composite vs. Newpark Resources |
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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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