Correlation Between Cencora and Newlake Capital

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

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

Diversification Opportunities for Cencora and Newlake Capital

-0.68

Correlation Coefficient

Cencora  Newlake Capital

Excellent diversification

The 3 months correlation between Cencora and Newlake is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Cencora and Newlake Capital Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newlake Capital Partners and Cencora 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 Cencora are associated (or correlated) with Newlake Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newlake Capital Partners has no effect on the direction of Cencora i.e., Cencora and Newlake Capital go up and down completely randomly.

Pair Corralation between Cencora and Newlake Capital

Considering the 90-day investment horizon Cencora is expected to generate 0.93 times more return on investment than Newlake Capital. However, Cencora is 1.08 times less risky than Newlake Capital. It trades about 0.05 of its potential returns per unit of risk. Newlake Capital Partners is currently generating about -0.04 per unit of risk. If you would invest  24,317  in Cencora on September 1, 2024 and sell it today you would earn a total of  838.00  from holding Cencora or generate 3.45% return on investment over 90 days.

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

Cencora  vs.  Newlake Capital Partners

Cencora

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cencora are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Cencora is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Newlake Capital Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Newlake Capital Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, Newlake Capital is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Cencora and Newlake Capital

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

The idea behind Cencora and Newlake Capital Partners 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.