Correlation Between INVION and New Residential

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

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

Diversification Opportunities for INVION and New Residential

0.28

Correlation Coefficient

INVION  New Residential

Modest diversification

The 3 months correlation between INVION and New is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding INVION and New Residential Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Residential Inve and INVION 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 INVION are associated (or correlated) with New Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Residential Inve has no effect on the direction of INVION i.e., INVION and New Residential go up and down completely randomly.

Pair Corralation between INVION and New Residential

Assuming the 90 days trading horizon INVION is expected to generate 29.49 times more return on investment than New Residential. However, INVION is 29.49 times more volatile than New Residential Investment. It trades about 0.34 of its potential returns per unit of risk. New Residential Investment is currently generating about -0.06 per unit of risk. If you would invest  5.00  in INVION on September 25, 2024 and sell it today you would earn a total of  12.00  from holding INVION or generate 240.0% return on investment over 90 days.

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

INVION  vs.  New Residential Investment

INVION

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in INVION are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, INVION exhibited solid returns over the last few months and may actually be approaching a breakup point.

New Residential Inve

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in New Residential Investment are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, New Residential may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with INVION and New Residential

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

The idea behind INVION and New Residential Investment 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.

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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.