Correlation Between Paccar and New Residential
Can any of the company-specific risk be diversified away by investing in both Paccar and New Residential 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 Paccar and New Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Paccar Inc and New Residential Investment, you can compare the effects of market volatilities on Paccar and New Residential 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 Paccar with a short position of New Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Paccar and New Residential.
Diversification Opportunities for Paccar and New Residential
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Paccar and New is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Paccar Inc and New Residential Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Residential Inve and Paccar 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 Paccar Inc are associated (or correlated) with New Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Residential Inve has no effect on the direction of Paccar i.e., Paccar and New Residential go up and down completely randomly.
Pair Corralation between Paccar and New Residential
Assuming the 90 days trading horizon Paccar Inc is expected to generate 2.98 times more return on investment than New Residential. However, Paccar is 2.98 times more volatile than New Residential Investment. It trades about 0.25 of its potential returns per unit of risk. New Residential Investment is currently generating about 0.41 per unit of risk. If you would invest 10,354 in Paccar Inc on September 4, 2024 and sell it today you would earn a total of 1,318 from holding Paccar Inc or generate 12.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Paccar Inc vs. New Residential Investment
Performance |
| Timeline |
| Paccar Inc |
| New Residential Inve |
Paccar and New Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Paccar and New Residential
The main advantage of trading using opposite Paccar and New Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Paccar position performs unexpectedly, New Residential 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 New Residential will offset losses from the drop in New Residential's long position.| Paccar vs. Golden Metal Resources | Paccar vs. AMG Advanced Metallurgical | Paccar vs. Morgan Advanced Materials | Paccar vs. Empire Metals Limited |
| New Residential vs. Samsung Electronics Co | New Residential vs. Samsung Electronics Co | New Residential vs. Hyundai Motor | New Residential vs. Toyota Motor 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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