Correlation Between New Residential and TRADEGATE
Can any of the company-specific risk be diversified away by investing in both New Residential and TRADEGATE 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 TRADEGATE 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 TRADEGATE, you can compare the effects of market volatilities on New Residential and TRADEGATE 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 TRADEGATE. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Residential and TRADEGATE.
Diversification Opportunities for New Residential and TRADEGATE
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between New and TRADEGATE is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment and TRADEGATE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRADEGATE 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 TRADEGATE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRADEGATE has no effect on the direction of New Residential i.e., New Residential and TRADEGATE go up and down completely randomly.
Pair Corralation between New Residential and TRADEGATE
Assuming the 90 days trading horizon New Residential Investment is expected to generate 4.3 times more return on investment than TRADEGATE. However, New Residential is 4.3 times more volatile than TRADEGATE. It trades about 0.03 of its potential returns per unit of risk. TRADEGATE is currently generating about 0.0 per unit of risk. If you would invest 1,031 in New Residential Investment on September 23, 2024 and sell it today you would earn a total of 17.00 from holding New Residential Investment or generate 1.65% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
New Residential Investment vs. TRADEGATE
Performance |
Timeline |
New Residential Inve |
TRADEGATE |
New Residential and TRADEGATE Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with New Residential and TRADEGATE
The main advantage of trading using opposite New Residential and TRADEGATE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Residential position performs unexpectedly, TRADEGATE 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 TRADEGATE will offset losses from the drop in TRADEGATE's long position.New Residential vs. Gentex | New Residential vs. Eaton PLC | New Residential vs. ImagineAR | New Residential vs. Nokia |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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