Correlation Between New Residential and BP PLC
Can any of the company-specific risk be diversified away by investing in both New Residential and BP PLC 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 Residential and BP PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Residential Investment and BP PLC ADR, you can compare the effects of market volatilities on New Residential and BP PLC 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 Residential with a short position of BP PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Residential and BP PLC.
Diversification Opportunities for New Residential and BP PLC
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between New and 0HKP is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment and BP PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP PLC ADR and New Residential 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 Residential Investment are associated (or correlated) with BP PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BP PLC ADR has no effect on the direction of New Residential i.e., New Residential and BP PLC go up and down completely randomly.
Pair Corralation between New Residential and BP PLC
Assuming the 90 days trading horizon New Residential Investment is expected to generate 0.98 times more return on investment than BP PLC. However, New Residential Investment is 1.02 times less risky than BP PLC. It trades about 0.05 of its potential returns per unit of risk. BP PLC ADR is currently generating about -0.04 per unit of risk. If you would invest 957.00 in New Residential Investment on September 3, 2024 and sell it today you would earn a total of 166.00 from holding New Residential Investment or generate 17.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.8% |
| Values | Daily Returns |
New Residential Investment vs. BP PLC ADR
Performance |
| Timeline |
| New Residential Inve |
| BP PLC ADR |
New Residential and BP PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Residential and BP PLC
The main advantage of trading using opposite New Residential and BP PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Residential position performs unexpectedly, BP PLC 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 BP PLC will offset losses from the drop in BP PLC's long position.| New Residential vs. CleanTech Lithium plc | New Residential vs. Pfeiffer Vacuum Technology | New Residential vs. Futura Medical | New Residential vs. Spotify Technology SA |
| BP PLC vs. Synchrony Financial | BP PLC vs. Target Healthcare REIT | BP PLC vs. Regions Financial Corp | BP PLC vs. Litigation Capital Management |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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