Correlation Between New Residential and Chevron Corp
Can any of the company-specific risk be diversified away by investing in both New Residential and Chevron Corp 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 Chevron Corp 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 Chevron Corp, you can compare the effects of market volatilities on New Residential and Chevron Corp 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 Chevron Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Residential and Chevron Corp.
Diversification Opportunities for New Residential and Chevron Corp
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between New and Chevron is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment and Chevron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron Corp 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 Chevron Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chevron Corp has no effect on the direction of New Residential i.e., New Residential and Chevron Corp go up and down completely randomly.
Pair Corralation between New Residential and Chevron Corp
Assuming the 90 days trading horizon New Residential Investment is expected to generate 1.29 times more return on investment than Chevron Corp. However, New Residential is 1.29 times more volatile than Chevron Corp. It trades about 0.0 of its potential returns per unit of risk. Chevron Corp is currently generating about -0.19 per unit of risk. If you would invest 1,094 in New Residential Investment on October 11, 2024 and sell it today you would lose (2.00) from holding New Residential Investment or give up 0.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
New Residential Investment vs. Chevron Corp
Performance |
| Timeline |
| New Residential Inve |
| Chevron Corp |
New Residential and Chevron Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Residential and Chevron Corp
The main advantage of trading using opposite New Residential and Chevron Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Residential position performs unexpectedly, Chevron Corp 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 Chevron Corp will offset losses from the drop in Chevron Corp's long position.| New Residential vs. Zoom Video Communications | New Residential vs. Travel Leisure Co | New Residential vs. Aeorema Communications Plc | New Residential vs. Kaufman Et Broad |
| Chevron Corp vs. Aberdeen Diversified Income | Chevron Corp vs. Beazer Homes USA | Chevron Corp vs. Pets at Home | Chevron Corp vs. New Residential 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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