Correlation Between New Palace and Les Enphants

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

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

Diversification Opportunities for New Palace and Les Enphants

0.55

Correlation Coefficient

New Palace  Les Enphants

Very weak diversification

The 3 months correlation between New and Les is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding New Palace International and Les Enphants Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Les Enphants and New Palace 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 Palace International are associated (or correlated) with Les Enphants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Les Enphants has no effect on the direction of New Palace i.e., New Palace and Les Enphants go up and down completely randomly.

Pair Corralation between New Palace and Les Enphants

Assuming the 90 days trading horizon New Palace International is expected to generate 1.04 times more return on investment than Les Enphants. However, New Palace is 1.04 times more volatile than Les Enphants Co. It trades about -0.09 of its potential returns per unit of risk. Les Enphants Co is currently generating about -0.42 per unit of risk. If you would invest  2,350  in New Palace International on September 1, 2024 and sell it today you would lose (55.00) from holding New Palace International or give up 2.34% of portfolio value over 90 days.

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

New Palace International  vs.  Les Enphants Co

New Palace International

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in New Palace International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, New Palace is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Les Enphants

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Les Enphants Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with New Palace and Les Enphants

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

The idea behind New Palace International and Les Enphants Co 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.