Correlation Between New Residential and Dalata Hotel

Can any of the company-specific risk be diversified away by investing in both New Residential and Dalata Hotel 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 New Residential and Dalata Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between New Residential Investment and Dalata Hotel Group, you can compare the effects of market volatilities on New Residential and Dalata Hotel 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 New Residential with a short position of Dalata Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Residential and Dalata Hotel.

Diversification Opportunities for New Residential and Dalata Hotel

0.33

Correlation Coefficient

New Residential  Dalata Hotel

Weak diversification

The 3 months correlation between New and Dalata is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment and Dalata Hotel Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dalata Hotel Group and New Residential 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 New Residential Investment are associated (or correlated) with Dalata Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dalata Hotel Group has no effect on the direction of New Residential i.e., New Residential and Dalata Hotel go up and down completely randomly.

Pair Corralation between New Residential and Dalata Hotel

Assuming the 90 days trading horizon New Residential Investment is expected to under-perform the Dalata Hotel. But the stock apears to be less risky and, when comparing its historical volatility, New Residential Investment is 1.7 times less risky than Dalata Hotel. The stock trades about -0.02 of its potential returns per unit of risk. The Dalata Hotel Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  37,500  in Dalata Hotel Group on September 27, 2024 and sell it today you would earn a total of  1,000.00  from holding Dalata Hotel Group or generate 2.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

New Residential Investment  vs.  Dalata Hotel Group

New Residential Inve

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Residential Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, New Residential is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Dalata Hotel Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dalata Hotel Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Dalata Hotel exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with New Residential and Dalata Hotel

The main advantage of trading using opposite New Residential and Dalata Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Residential position performs unexpectedly, Dalata Hotel 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 Dalata Hotel will offset losses from the drop in Dalata Hotel's long position.

The idea behind New Residential Investment and Dalata Hotel Group 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.