Correlation Between New Residential and EMBARK EDUCATION
Can any of the company-specific risk be diversified away by investing in both New Residential and EMBARK EDUCATION 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 EMBARK EDUCATION 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 EMBARK EDUCATION LTD, you can compare the effects of market volatilities on New Residential and EMBARK EDUCATION 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 EMBARK EDUCATION. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Residential and EMBARK EDUCATION.
Diversification Opportunities for New Residential and EMBARK EDUCATION
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between New and EMBARK is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment and EMBARK EDUCATION LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMBARK EDUCATION LTD 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 EMBARK EDUCATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMBARK EDUCATION LTD has no effect on the direction of New Residential i.e., New Residential and EMBARK EDUCATION go up and down completely randomly.
Pair Corralation between New Residential and EMBARK EDUCATION
Assuming the 90 days trading horizon New Residential Investment is expected to generate 2.67 times more return on investment than EMBARK EDUCATION. However, New Residential is 2.67 times more volatile than EMBARK EDUCATION LTD. It trades about 0.2 of its potential returns per unit of risk. EMBARK EDUCATION LTD is currently generating about 0.13 per unit of risk. If you would invest 942.00 in New Residential Investment on October 26, 2024 and sell it today you would earn a total of 134.00 from holding New Residential Investment or generate 14.23% 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. EMBARK EDUCATION LTD
Performance |
Timeline |
New Residential Inve |
EMBARK EDUCATION LTD |
New Residential and EMBARK EDUCATION Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with New Residential and EMBARK EDUCATION
The main advantage of trading using opposite New Residential and EMBARK EDUCATION positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Residential position performs unexpectedly, EMBARK EDUCATION 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 EMBARK EDUCATION will offset losses from the drop in EMBARK EDUCATION's long position.New Residential vs. Cleanaway Waste Management | New Residential vs. OPERA SOFTWARE | New Residential vs. Beta Systems Software | New Residential vs. Axway Software SA |
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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 Managers module to screen money managers from public funds and ETFs managed around the world.
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