Correlation Between New England and Maui Land

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

By analyzing existing cross correlation between New England Realty and Maui Land Pineapple, you can compare the effects of market volatilities on New England and Maui Land 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 New England with a short position of Maui Land. Check out your portfolio center. Please also check ongoing floating volatility patterns of New England and Maui Land.

Diversification Opportunities for New England and Maui Land

0.09

Correlation Coefficient

New England  Maui Land

Significant diversification

The 3 months correlation between New and Maui is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding New England Realty and Maui Land Pineapple in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maui Land Pineapple and New England 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 New England Realty are associated (or correlated) with Maui Land. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maui Land Pineapple has no effect on the direction of New England i.e., New England and Maui Land go up and down completely randomly.

Pair Corralation between New England and Maui Land

Considering the 90-day investment horizon New England Realty is expected to generate 0.86 times more return on investment than Maui Land. However, New England Realty is 1.16 times less risky than Maui Land. It trades about 0.05 of its potential returns per unit of risk. Maui Land Pineapple is currently generating about 0.01 per unit of risk. If you would invest  8,055  in New England Realty on August 31, 2024 and sell it today you would earn a total of  192.00  from holding New England Realty or generate 2.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	42.86%
Values	Daily Returns

New England Realty  vs.  Maui Land Pineapple

New England Realty

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days New England Realty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very uncertain technical and fundamental indicators, New England may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Maui Land Pineapple

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with New England and Maui Land

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

The idea behind New England Realty and Maui Land Pineapple 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..