Correlation Between East Resources and NewHold Investment

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

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

Diversification Opportunities for East Resources and NewHold Investment

0.53

Correlation Coefficient

East Resources  NewHold Investment

Very weak diversification

The 3 months correlation between East and NewHold is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding East Resources Acquisition and NewHold Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NewHold Investment Corp and East Resources 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 East Resources Acquisition are associated (or correlated) with NewHold Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NewHold Investment Corp has no effect on the direction of East Resources i.e., East Resources and NewHold Investment go up and down completely randomly.

Pair Corralation between East Resources and NewHold Investment

If you would invest  1.30  in NewHold Investment Corp on September 10, 2024 and sell it today you would earn a total of  0.00  from holding NewHold Investment Corp or generate 0.0% return on investment over 90 days.

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

East Resources Acquisition  vs.  NewHold Investment Corp

East Resources Acqui

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days East Resources Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, East Resources is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

NewHold Investment Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NewHold Investment Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, NewHold Investment is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with East Resources and NewHold Investment

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

The idea behind East Resources Acquisition and NewHold Investment Corp 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.