Correlation Between New Residential and DNB BANK
Can any of the company-specific risk be diversified away by investing in both New Residential and DNB BANK 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 DNB BANK 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 DNB BANK ASA, you can compare the effects of market volatilities on New Residential and DNB BANK 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 DNB BANK. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Residential and DNB BANK.
Diversification Opportunities for New Residential and DNB BANK
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between New and DNB is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment and DNB BANK ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DNB BANK ASA 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 DNB BANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DNB BANK ASA has no effect on the direction of New Residential i.e., New Residential and DNB BANK go up and down completely randomly.
Pair Corralation between New Residential and DNB BANK
Assuming the 90 days trading horizon New Residential is expected to generate 1.3 times less return on investment than DNB BANK. But when comparing it to its historical volatility, New Residential Investment is 1.7 times less risky than DNB BANK. It trades about 0.06 of its potential returns per unit of risk. DNB BANK ASA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,779 in DNB BANK ASA on September 1, 2024 and sell it today you would earn a total of 166.00 from holding DNB BANK ASA or generate 9.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.24% |
| Values | Daily Returns |
New Residential Investment vs. DNB BANK ASA
Performance |
| Timeline |
| New Residential Inve |
| DNB BANK ASA |
New Residential and DNB BANK Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Residential and DNB BANK
The main advantage of trading using opposite New Residential and DNB BANK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Residential position performs unexpectedly, DNB BANK 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 DNB BANK will offset losses from the drop in DNB BANK's long position.| New Residential vs. TRAINLINE PLC LS | New Residential vs. Soken Chemical Engineering | New Residential vs. Siamgas And Petrochemicals | New Residential vs. SEKISUI CHEMICAL |
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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