Correlation Between New Residential and Central Asia
Can any of the company-specific risk be diversified away by investing in both New Residential and Central Asia 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 Central Asia 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 Central Asia Metals, you can compare the effects of market volatilities on New Residential and Central Asia 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 Central Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Residential and Central Asia.
Diversification Opportunities for New Residential and Central Asia
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between New and Central is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment and Central Asia Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Asia Metals 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 Central Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Asia Metals has no effect on the direction of New Residential i.e., New Residential and Central Asia go up and down completely randomly.
Pair Corralation between New Residential and Central Asia
Assuming the 90 days trading horizon New Residential Investment is expected to generate 0.75 times more return on investment than Central Asia. However, New Residential Investment is 1.33 times less risky than Central Asia. It trades about 0.31 of its potential returns per unit of risk. Central Asia Metals is currently generating about -0.3 per unit of risk. If you would invest 1,064 in New Residential Investment on September 1, 2024 and sell it today you would earn a total of 66.00 from holding New Residential Investment or generate 6.2% 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. Central Asia Metals
Performance |
| Timeline |
| New Residential Inve |
| Central Asia Metals |
New Residential and Central Asia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Residential and Central Asia
The main advantage of trading using opposite New Residential and Central Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Residential position performs unexpectedly, Central Asia 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 Central Asia will offset losses from the drop in Central Asia's long position.| New Residential vs. Uniper SE | New Residential vs. Mulberry Group PLC | New Residential vs. London Security Plc | New Residential vs. Triad Group PLC |
| Central Asia vs. Bisichi Mining PLC | Central Asia vs. McEwen Mining | Central Asia vs. Coeur Mining | Central Asia vs. GoldMining |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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