Correlation Between New Residential and BW Offshore
Can any of the company-specific risk be diversified away by investing in both New Residential and BW Offshore 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 BW Offshore 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 BW Offshore, you can compare the effects of market volatilities on New Residential and BW Offshore 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 BW Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Residential and BW Offshore.
Diversification Opportunities for New Residential and BW Offshore
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between New and 0RKH is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment and BW Offshore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW Offshore 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 BW Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BW Offshore has no effect on the direction of New Residential i.e., New Residential and BW Offshore go up and down completely randomly.
Pair Corralation between New Residential and BW Offshore
Assuming the 90 days trading horizon New Residential is expected to generate 1.36 times less return on investment than BW Offshore. But when comparing it to its historical volatility, New Residential Investment is 1.33 times less risky than BW Offshore. It trades about 0.23 of its potential returns per unit of risk. BW Offshore is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 2,775 in BW Offshore on October 23, 2024 and sell it today you would earn a total of 250.00 from holding BW Offshore or generate 9.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 94.74% |
| Values | Daily Returns |
New Residential Investment vs. BW Offshore
Performance |
| Timeline |
| New Residential Inve |
| BW Offshore |
New Residential and BW Offshore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Residential and BW Offshore
The main advantage of trading using opposite New Residential and BW Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Residential position performs unexpectedly, BW Offshore 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 BW Offshore will offset losses from the drop in BW Offshore's long position.| New Residential vs. Home Depot | New Residential vs. Weiss Korea Opportunity | New Residential vs. River and Mercantile | New Residential vs. Chrysalis Investments |
| BW Offshore vs. Chrysalis Investments | BW Offshore vs. Herald Investment Trust | BW Offshore vs. Caledonia Investments | BW Offshore vs. Seraphim Space 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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