Correlation Between TR Property and New Residential

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

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

Diversification Opportunities for TR Property and New Residential

0.32

Correlation Coefficient

TR Property  New Residential

Weak diversification

The 3 months correlation between TRY and New is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding TR Property Investment 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 TR Property 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 TR Property Investment 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 TR Property i.e., TR Property and New Residential go up and down completely randomly.

Pair Corralation between TR Property and New Residential

Assuming the 90 days trading horizon TR Property Investment is expected to under-perform the New Residential. But the stock apears to be less risky and, when comparing its historical volatility, TR Property Investment is 1.01 times less risky than New Residential. The stock trades about -0.13 of its potential returns per unit of risk. The New Residential Investment is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,126  in New Residential Investment on September 12, 2024 and sell it today you would lose (6.00) from holding New Residential Investment or give up 0.53% of portfolio value over 90 days.

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

TR Property Investment  vs.  New Residential Investment

TR Property Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TR Property Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm 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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with TR Property and New Residential

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

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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.