Correlation Between New Residential and Avon Protection
Can any of the company-specific risk be diversified away by investing in both New Residential and Avon Protection 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 Avon Protection 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 Avon Protection PLC, you can compare the effects of market volatilities on New Residential and Avon Protection 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 Avon Protection. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Residential and Avon Protection.
Diversification Opportunities for New Residential and Avon Protection
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between New and Avon is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment and Avon Protection PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avon Protection PLC 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 Avon Protection. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avon Protection PLC has no effect on the direction of New Residential i.e., New Residential and Avon Protection go up and down completely randomly.
Pair Corralation between New Residential and Avon Protection
Assuming the 90 days trading horizon New Residential is expected to generate 3.69 times less return on investment than Avon Protection. But when comparing it to its historical volatility, New Residential Investment is 2.43 times less risky than Avon Protection. It trades about 0.19 of its potential returns per unit of risk. Avon Protection PLC is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 122,200 in Avon Protection PLC on September 13, 2024 and sell it today you would earn a total of 15,600 from holding Avon Protection PLC or generate 12.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Residential Investment vs. Avon Protection PLC
Performance |
| Timeline |
| New Residential Inve |
| Avon Protection PLC |
New Residential and Avon Protection Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Residential and Avon Protection
The main advantage of trading using opposite New Residential and Avon Protection positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Residential position performs unexpectedly, Avon Protection 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 Avon Protection will offset losses from the drop in Avon Protection's long position.| New Residential vs. Samsung Electronics Co | New Residential vs. Samsung Electronics Co | New Residential vs. Hyundai Motor | New Residential vs. Reliance Industries Ltd |
| Avon Protection vs. Vitec Software Group | Avon Protection vs. HCA Healthcare | Avon Protection vs. Prudential Financial | Avon Protection vs. MT Bank Corp |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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