Correlation Between New Residential and CSL
Can any of the company-specific risk be diversified away by investing in both New Residential and CSL 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 CSL 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 CSL Limited, you can compare the effects of market volatilities on New Residential and CSL 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 CSL. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Residential and CSL.
Diversification Opportunities for New Residential and CSL
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between New and CSL is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment and CSL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSL Limited 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 CSL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSL Limited has no effect on the direction of New Residential i.e., New Residential and CSL go up and down completely randomly.
Pair Corralation between New Residential and CSL
Assuming the 90 days trading horizon New Residential Investment is expected to generate 0.69 times more return on investment than CSL. However, New Residential Investment is 1.45 times less risky than CSL. It trades about -0.06 of its potential returns per unit of risk. CSL Limited is currently generating about -0.19 per unit of risk. If you would invest 1,060 in New Residential Investment on September 24, 2024 and sell it today you would lose (12.00) from holding New Residential Investment or give up 1.13% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Residential Investment vs. CSL Limited
Performance |
| Timeline |
| New Residential Inve |
| CSL Limited |
New Residential and CSL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Residential and CSL
The main advantage of trading using opposite New Residential and CSL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Residential position performs unexpectedly, CSL 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 CSL will offset losses from the drop in CSL's long position.| New Residential vs. Gentex | New Residential vs. Eaton PLC | New Residential vs. ImagineAR | New Residential vs. Nokia |
| CSL vs. Novo Nordisk AS | CSL vs. Mercedes Benz Group AG | CSL vs. Vertex Pharmaceuticals Incorporated | CSL vs. Moderna |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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