Correlation Between Lowland Investment and New Residential

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

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

Diversification Opportunities for Lowland Investment and New Residential

0.77

Correlation Coefficient

Lowland Investment  New Residential

Poor diversification

The 3 months correlation between Lowland and New is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Lowland Investment Co 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 Lowland Investment 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 Lowland Investment Co 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 Lowland Investment i.e., Lowland Investment and New Residential go up and down completely randomly.

Pair Corralation between Lowland Investment and New Residential

Assuming the 90 days trading horizon Lowland Investment Co is expected to under-perform the New Residential. But the stock apears to be less risky and, when comparing its historical volatility, Lowland Investment Co is 1.17 times less risky than New Residential. The stock trades about -0.08 of its potential returns per unit of risk. The New Residential Investment is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  1,181  in New Residential Investment on August 31, 2024 and sell it today you would lose (59.00) from holding New Residential Investment or give up 5.0% of portfolio value over 90 days.

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

Lowland Investment Co  vs.  New Residential Investment

Lowland Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lowland Investment Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Lowland Investment is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

New Residential Inve

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Residential Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, New Residential is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Lowland Investment and New Residential

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

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.