Correlation Between New England and Transcontinental

Can any of the company-specific risk be diversified away by investing in both New England and Transcontinental 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 Transcontinental 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 Transcontinental Realty Investors, you can compare the effects of market volatilities on New England and Transcontinental 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 Transcontinental. Check out your portfolio center. Please also check ongoing floating volatility patterns of New England and Transcontinental.

Diversification Opportunities for New England and Transcontinental

-0.32

Correlation Coefficient

New England  Transcontinental

Very good diversification

The 3 months correlation between New and Transcontinental is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding New England Realty and Transcontinental Realty Invest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transcontinental Realty 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 Transcontinental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transcontinental Realty has no effect on the direction of New England i.e., New England and Transcontinental go up and down completely randomly.

Pair Corralation between New England and Transcontinental

Considering the 90-day investment horizon New England Realty is expected to generate 1.66 times more return on investment than Transcontinental. However, New England is 1.66 times more volatile than Transcontinental Realty Investors. It trades about 0.05 of its potential returns per unit of risk. Transcontinental Realty Investors is currently generating about 0.04 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 Against
Strength	Insignificant
Accuracy	42.86%
Values	Daily Returns

New England Realty  vs.  Transcontinental Realty Invest

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.

Transcontinental Realty

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Transcontinental Realty Investors are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, Transcontinental is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with New England and Transcontinental

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

The idea behind New England Realty and Transcontinental Realty Investors 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.