Correlation Between FARM 51 and New Residential

Can any of the company-specific risk be diversified away by investing in both FARM 51 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 FARM 51 and New Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FARM 51 GROUP and New Residential Investment, you can compare the effects of market volatilities on FARM 51 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 FARM 51 with a short position of New Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of FARM 51 and New Residential.

Diversification Opportunities for FARM 51 and New Residential

-0.56

Correlation Coefficient

FARM 51  New Residential

Excellent diversification

The 3 months correlation between FARM and New is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding FARM 51 GROUP 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 FARM 51 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 FARM 51 GROUP 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 FARM 51 i.e., FARM 51 and New Residential go up and down completely randomly.

Pair Corralation between FARM 51 and New Residential

Assuming the 90 days horizon FARM 51 GROUP is expected to under-perform the New Residential. In addition to that, FARM 51 is 2.34 times more volatile than New Residential Investment. It trades about -0.06 of its total potential returns per unit of risk. New Residential Investment is currently generating about 0.1 per unit of volatility. If you would invest  987.00  in New Residential Investment on September 27, 2024 and sell it today you would earn a total of  58.00  from holding New Residential Investment or generate 5.88% return on investment over 90 days.

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

FARM 51 GROUP  vs.  New Residential Investment

FARM 51 GROUP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FARM 51 GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

New Residential Inve

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in New Residential Investment are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, New Residential is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with FARM 51 and New Residential

The main advantage of trading using opposite FARM 51 and New Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FARM 51 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 FARM 51 GROUP 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.

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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.