Correlation Between Re Max and Newmark

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

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

Diversification Opportunities for Re Max and Newmark

0.6

Correlation Coefficient

Re Max  Newmark

Poor diversification

The 3 months correlation between RMAX and Newmark is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Re Max Holding and Newmark Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newmark Group and Re Max 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 Re Max Holding are associated (or correlated) with Newmark. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newmark Group has no effect on the direction of Re Max i.e., Re Max and Newmark go up and down completely randomly.

Pair Corralation between Re Max and Newmark

Given the investment horizon of 90 days Re Max Holding is expected to generate 2.5 times more return on investment than Newmark. However, Re Max is 2.5 times more volatile than Newmark Group. It trades about 0.13 of its potential returns per unit of risk. Newmark Group is currently generating about 0.14 per unit of risk. If you would invest  1,193  in Re Max Holding on September 4, 2024 and sell it today you would earn a total of  128.00  from holding Re Max Holding or generate 10.73% return on investment over 90 days.

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

Re Max Holding  vs.  Newmark Group

Re Max Holding

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Re Max Holding are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Re Max showed solid returns over the last few months and may actually be approaching a breakup point.

Newmark Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Newmark Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Newmark may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Re Max and Newmark

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

The idea behind Re Max Holding and Newmark Group 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.