Correlation Between New Residential and Microsoft
Can any of the company-specific risk be diversified away by investing in both New Residential and Microsoft 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 Microsoft 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 Microsoft, you can compare the effects of market volatilities on New Residential and Microsoft 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 Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Residential and Microsoft.
Diversification Opportunities for New Residential and Microsoft
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between New and Microsoft is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft 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 Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of New Residential i.e., New Residential and Microsoft go up and down completely randomly.
Pair Corralation between New Residential and Microsoft
Assuming the 90 days trading horizon New Residential Investment is expected to generate 0.63 times more return on investment than Microsoft. However, New Residential Investment is 1.58 times less risky than Microsoft. It trades about 0.34 of its potential returns per unit of risk. Microsoft is currently generating about 0.04 per unit of risk. If you would invest 965.00 in New Residential Investment on August 28, 2024 and sell it today you would earn a total of 87.00 from holding New Residential Investment or generate 9.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
New Residential Investment vs. Microsoft
Performance |
| Timeline |
| New Residential Inve |
| Microsoft |
New Residential and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Residential and Microsoft
The main advantage of trading using opposite New Residential and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Residential position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.| New Residential vs. Xtrackers ShortDAX | New Residential vs. Xtrackers LevDAX | New Residential vs. Lyxor 1 |
| Microsoft vs. CDL INVESTMENT | Microsoft vs. CapitaLand Investment Limited | Microsoft vs. New Residential Investment | Microsoft vs. Constellation Software |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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