Correlation Between New Residential and Agricultural Bank
Can any of the company-specific risk be diversified away by investing in both New Residential and Agricultural 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 Agricultural 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 Agricultural Bank of, you can compare the effects of market volatilities on New Residential and Agricultural 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 Agricultural Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Residential and Agricultural Bank.
Diversification Opportunities for New Residential and Agricultural Bank
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between New and Agricultural is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment and Agricultural Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agricultural Bank 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 Agricultural Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agricultural Bank has no effect on the direction of New Residential i.e., New Residential and Agricultural Bank go up and down completely randomly.
Pair Corralation between New Residential and Agricultural Bank
Assuming the 90 days trading horizon New Residential Investment is expected to generate 0.85 times more return on investment than Agricultural Bank. However, New Residential Investment is 1.17 times less risky than Agricultural Bank. It trades about 0.21 of its potential returns per unit of risk. Agricultural Bank of is currently generating about 0.08 per unit of risk. If you would invest 1,063 in New Residential Investment on November 7, 2024 and sell it today you would earn a total of 46.00 from holding New Residential Investment or generate 4.33% 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. Agricultural Bank of
Performance |
| Timeline |
| New Residential Inve |
| Agricultural Bank |
New Residential and Agricultural Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Residential and Agricultural Bank
The main advantage of trading using opposite New Residential and Agricultural Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Residential position performs unexpectedly, Agricultural 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 Agricultural Bank will offset losses from the drop in Agricultural Bank's long position.| New Residential vs. GLG LIFE TECH | New Residential vs. KINGBOARD CHEMICAL | New Residential vs. Agilent Technologies | New Residential vs. SEKISUI CHEMICAL |
| Agricultural Bank vs. National Retail Properties | Agricultural Bank vs. Burlington Stores | Agricultural Bank vs. ARDAGH METAL PACDL 0001 | Agricultural Bank vs. Zijin Mining Group |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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