Correlation Between St Joe and New World

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

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

Diversification Opportunities for St Joe and New World

0.22

Correlation Coefficient

St Joe  New World

Modest diversification

The 3 months correlation between JOE and New is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding St Joe Company and New World Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New World Development and St Joe 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 St Joe Company are associated (or correlated) with New World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New World Development has no effect on the direction of St Joe i.e., St Joe and New World go up and down completely randomly.

Pair Corralation between St Joe and New World

Considering the 90-day investment horizon St Joe Company is expected to under-perform the New World. But the stock apears to be less risky and, when comparing its historical volatility, St Joe Company is 5.93 times less risky than New World. The stock trades about -0.13 of its potential returns per unit of risk. The New World Development is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  45.00  in New World Development on September 3, 2024 and sell it today you would lose (3.00) from holding New World Development or give up 6.67% of portfolio value over 90 days.

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

St Joe Company  vs.  New World Development

St Joe Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days St Joe Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

New World Development

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in New World Development are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, New World showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with St Joe and New World

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

The idea behind St Joe Company and New World Development 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.