This module allows you to analyze existing cross correlation between NYSE and S&P 500. You can compare the effects of market volatilities on NYSE and SP 500 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 with a short position of SP 500. See also your portfolio center. Please also check ongoing floating volatility patterns of NYSE and SP 500.
Given the investment horizon of 30 days, NYSE is expected to generate 0.81 times more return on investment than SP 500. However, NYSE is 1.23 times less risky than SP 500. It trades about -0.08 of its potential returns per unit of risk. S&P 500 is currently generating about -0.09 per unit of risk. If you would invest 1,264,595 in NYSE on October 17, 2018 and sell it today you would lose (28,443) from holding NYSE or give up 2.25% of portfolio value over 30 days.
Overlapping area represents the amount of risk that can be diversified away by holding NYSE and S&P 500 in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on SP 500 and NYSE 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 are associated (or correlated) with SP 500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SP 500 has no effect on the direction of NYSE i.e. NYSE and SP 500 go up and down completely randomly.
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