Correlation Between New Residential and 3I Group
Can any of the company-specific risk be diversified away by investing in both New Residential and 3I Group 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 3I Group 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 3I Group PLC, you can compare the effects of market volatilities on New Residential and 3I Group 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 3I Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Residential and 3I Group.
Diversification Opportunities for New Residential and 3I Group
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between New and III is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment and 3I Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 3I Group 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 3I Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 3I Group PLC has no effect on the direction of New Residential i.e., New Residential and 3I Group go up and down completely randomly.
Pair Corralation between New Residential and 3I Group
Assuming the 90 days trading horizon New Residential is expected to generate 1.97 times less return on investment than 3I Group. In addition to that, New Residential is 1.68 times more volatile than 3I Group PLC. It trades about 0.04 of its total potential returns per unit of risk. 3I Group PLC is currently generating about 0.14 per unit of volatility. If you would invest 140,948 in 3I Group PLC on October 12, 2024 and sell it today you would earn a total of 218,452 from holding 3I Group PLC or generate 154.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
New Residential Investment vs. 3I Group PLC
Performance |
| Timeline |
| New Residential Inve |
| 3I Group PLC |
New Residential and 3I Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Residential and 3I Group
The main advantage of trading using opposite New Residential and 3I Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Residential position performs unexpectedly, 3I Group 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 3I Group will offset losses from the drop in 3I Group's long position.| New Residential vs. Walmart | New Residential vs. BYD Co | New Residential vs. Volkswagen AG | New Residential vs. Volkswagen AG Non Vtg |
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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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