Correlation Between New Residential and Polar Capital
Can any of the company-specific risk be diversified away by investing in both New Residential and Polar Capital 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 Polar Capital 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 Polar Capital Technology, you can compare the effects of market volatilities on New Residential and Polar Capital 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 Polar Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Residential and Polar Capital.
Diversification Opportunities for New Residential and Polar Capital
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between New and Polar is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment and Polar Capital Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polar Capital Technology 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 Polar Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polar Capital Technology has no effect on the direction of New Residential i.e., New Residential and Polar Capital go up and down completely randomly.
Pair Corralation between New Residential and Polar Capital
Assuming the 90 days trading horizon New Residential is expected to generate 1.32 times less return on investment than Polar Capital. In addition to that, New Residential is 1.8 times more volatile than Polar Capital Technology. It trades about 0.04 of its total potential returns per unit of risk. Polar Capital Technology is currently generating about 0.11 per unit of volatility. If you would invest 18,080 in Polar Capital Technology on October 11, 2024 and sell it today you would earn a total of 17,220 from holding Polar Capital Technology or generate 95.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
New Residential Investment vs. Polar Capital Technology
Performance |
| Timeline |
| New Residential Inve |
| Polar Capital Technology |
New Residential and Polar Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Residential and Polar Capital
The main advantage of trading using opposite New Residential and Polar Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Residential position performs unexpectedly, Polar Capital 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 Polar Capital will offset losses from the drop in Polar Capital's long position.| New Residential vs. Zoom Video Communications | New Residential vs. Travel Leisure Co | New Residential vs. Aeorema Communications Plc | New Residential vs. Kaufman Et Broad |
| Polar Capital vs. Smithson Investment Trust | Polar Capital vs. Bankers Investment Trust | Polar Capital vs. Zoom Video Communications | Polar Capital vs. New Residential 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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