Correlation Between New Residential and Gear4music Plc
Can any of the company-specific risk be diversified away by investing in both New Residential and Gear4music 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 Gear4music 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 Gear4music Plc, you can compare the effects of market volatilities on New Residential and Gear4music 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 Gear4music Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Residential and Gear4music Plc.
Diversification Opportunities for New Residential and Gear4music Plc
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between New and Gear4music is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment and Gear4music Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gear4music 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 Gear4music Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gear4music Plc has no effect on the direction of New Residential i.e., New Residential and Gear4music Plc go up and down completely randomly.
Pair Corralation between New Residential and Gear4music Plc
Assuming the 90 days trading horizon New Residential Investment is expected to generate 0.92 times more return on investment than Gear4music Plc. However, New Residential Investment is 1.08 times less risky than Gear4music Plc. It trades about 0.07 of its potential returns per unit of risk. Gear4music Plc is currently generating about -0.09 per unit of risk. If you would invest 1,089 in New Residential Investment on October 26, 2024 and sell it today you would earn a total of 43.00 from holding New Residential Investment or generate 3.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.62% |
| Values | Daily Returns |
New Residential Investment vs. Gear4music Plc
Performance |
| Timeline |
| New Residential Inve |
| Gear4music Plc |
New Residential and Gear4music Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Residential and Gear4music Plc
The main advantage of trading using opposite New Residential and Gear4music Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Residential position performs unexpectedly, Gear4music 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 Gear4music Plc will offset losses from the drop in Gear4music Plc's long position.| New Residential vs. Berkshire Hathaway | New Residential vs. Samsung Electronics Co | New Residential vs. Samsung Electronics Co | New Residential vs. Chocoladefabriken Lindt Spruengli |
| Gear4music Plc vs. Charter Communications Cl | Gear4music Plc vs. Micron Technology | Gear4music Plc vs. Axway Software SA | Gear4music Plc vs. Software Circle plc |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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