Correlation Between NYSE Composite and FTI Consulting

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Can any of the company-specific risk be diversified away by investing in both NYSE Composite and FTI Consulting 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 FTI Consulting into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and FTI Consulting, you can compare the effects of market volatilities on NYSE Composite and FTI Consulting 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 FTI Consulting. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and FTI Consulting.

Diversification Opportunities for NYSE Composite and FTI Consulting

0.58
  Correlation Coefficient

Very weak diversification

The 3 months correlation between NYSE and FTI is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and FTI Consulting in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FTI Consulting 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 FTI Consulting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FTI Consulting has no effect on the direction of NYSE Composite i.e., NYSE Composite and FTI Consulting go up and down completely randomly.
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Pair Corralation between NYSE Composite and FTI Consulting

Assuming the 90 days trading horizon NYSE Composite is expected to under-perform the FTI Consulting. But the index apears to be less risky and, when comparing its historical volatility, NYSE Composite is 1.36 times less risky than FTI Consulting. The index trades about -0.16 of its potential returns per unit of risk. The FTI Consulting is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  20,708  in FTI Consulting on February 3, 2024 and sell it today you would earn a total of  817.00  from holding FTI Consulting or generate 3.95% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

NYSE Composite  vs.  FTI Consulting

 Performance 
       Timeline  

NYSE Composite and FTI Consulting Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NYSE Composite and FTI Consulting

The main advantage of trading using opposite NYSE Composite and FTI Consulting positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, FTI Consulting 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 FTI Consulting will offset losses from the drop in FTI Consulting's long position.
The idea behind NYSE Composite and FTI Consulting pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.

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