Correlation Between One Choice and Extended Market
Can any of the company-specific risk be diversified away by investing in both One Choice and Extended Market 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 One Choice and Extended Market into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between One Choice In and Extended Market Index, you can compare the effects of market volatilities on One Choice and Extended Market 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 One Choice with a short position of Extended Market. Check out your portfolio center. Please also check ongoing floating volatility patterns of One Choice and Extended Market.
Diversification Opportunities for One Choice and Extended Market
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between One and Extended is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding One Choice In and Extended Market Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Extended Market Index and One Choice 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 One Choice In are associated (or correlated) with Extended Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Extended Market Index has no effect on the direction of One Choice i.e., One Choice and Extended Market go up and down completely randomly.
Pair Corralation between One Choice and Extended Market
Assuming the 90 days horizon One Choice is expected to generate 2.6 times less return on investment than Extended Market. But when comparing it to its historical volatility, One Choice In is 3.39 times less risky than Extended Market. It trades about 0.25 of its potential returns per unit of risk. Extended Market Index is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 1,947 in Extended Market Index on May 30, 2025 and sell it today you would earn a total of 240.00 from holding Extended Market Index or generate 12.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 98.41% |
| Values | Daily Returns |
One Choice In vs. Extended Market Index
Performance |
| Timeline |
| One Choice In |
| Extended Market Index |
One Choice and Extended Market Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with One Choice and Extended Market
The main advantage of trading using opposite One Choice and Extended Market positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if One Choice position performs unexpectedly, Extended Market 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 Extended Market will offset losses from the drop in Extended Market's long position.| One Choice vs. One Choice 2025 | One Choice vs. One Choice 2035 | One Choice vs. One Choice 2045 | One Choice vs. One Choice Portfolio |
| Extended Market vs. Income Fund Income | Extended Market vs. Usaa Nasdaq 100 | Extended Market vs. Victory Diversified Stock | Extended Market vs. Intermediate Term Bond Fund |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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