Correlation Between New Residential and MidCap Financial
Can any of the company-specific risk be diversified away by investing in both New Residential and MidCap Financial 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 MidCap Financial 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 MidCap Financial Investment, you can compare the effects of market volatilities on New Residential and MidCap Financial 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 MidCap Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Residential and MidCap Financial.
Diversification Opportunities for New Residential and MidCap Financial
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between New and MidCap is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment and MidCap Financial Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MidCap Financial Inv 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 MidCap Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MidCap Financial Inv has no effect on the direction of New Residential i.e., New Residential and MidCap Financial go up and down completely randomly.
Pair Corralation between New Residential and MidCap Financial
Assuming the 90 days trading horizon New Residential Investment is expected to generate 0.84 times more return on investment than MidCap Financial. However, New Residential Investment is 1.19 times less risky than MidCap Financial. It trades about 0.09 of its potential returns per unit of risk. MidCap Financial Investment is currently generating about 0.07 per unit of risk. If you would invest 856.00 in New Residential Investment on November 3, 2024 and sell it today you would earn a total of 231.00 from holding New Residential Investment or generate 26.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Residential Investment vs. MidCap Financial Investment
Performance |
| Timeline |
| New Residential Inve |
| MidCap Financial Inv |
New Residential and MidCap Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Residential and MidCap Financial
The main advantage of trading using opposite New Residential and MidCap Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Residential position performs unexpectedly, MidCap Financial 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 MidCap Financial will offset losses from the drop in MidCap Financial's long position.| New Residential vs. Zijin Mining Group | New Residential vs. Harmony Gold Mining | New Residential vs. Tradegate AG Wertpapierhandelsbank | New Residential vs. Perseus Mining Limited |
| MidCap Financial vs. SIVERS SEMICONDUCTORS AB | MidCap Financial vs. NorAm Drilling AS | MidCap Financial vs. Volkswagen AG | MidCap Financial vs. Darden Restaurants |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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