Correlation Between New Age and Group Ten

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

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

Diversification Opportunities for New Age and Group Ten

0.66

Correlation Coefficient

New Age  Group Ten

Poor diversification

The 3 months correlation between New and Group is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding New Age Metals and Group Ten Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Group Ten Metals and New Age 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 Age Metals are associated (or correlated) with Group Ten. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Group Ten Metals has no effect on the direction of New Age i.e., New Age and Group Ten go up and down completely randomly.

Pair Corralation between New Age and Group Ten

Assuming the 90 days horizon New Age Metals is expected to generate 3.18 times more return on investment than Group Ten. However, New Age is 3.18 times more volatile than Group Ten Metals. It trades about 0.14 of its potential returns per unit of risk. Group Ten Metals is currently generating about 0.07 per unit of risk. If you would invest  2.06  in New Age Metals on September 12, 2024 and sell it today you would earn a total of  4.34  from holding New Age Metals or generate 210.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

New Age Metals  vs.  Group Ten Metals

New Age Metals

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in New Age Metals are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, New Age reported solid returns over the last few months and may actually be approaching a breakup point.

Group Ten Metals

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Group Ten Metals are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Group Ten reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with New Age and Group Ten

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

The idea behind New Age Metals and Group Ten Metals 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.