Correlation Between New Residential and OBSERVE MEDICAL
Can any of the company-specific risk be diversified away by investing in both New Residential and OBSERVE MEDICAL 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 OBSERVE MEDICAL 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 OBSERVE MEDICAL ASA, you can compare the effects of market volatilities on New Residential and OBSERVE MEDICAL 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 OBSERVE MEDICAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Residential and OBSERVE MEDICAL.
Diversification Opportunities for New Residential and OBSERVE MEDICAL
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between New and OBSERVE is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment and OBSERVE MEDICAL ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OBSERVE MEDICAL 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 OBSERVE MEDICAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OBSERVE MEDICAL ASA has no effect on the direction of New Residential i.e., New Residential and OBSERVE MEDICAL go up and down completely randomly.
Pair Corralation between New Residential and OBSERVE MEDICAL
Assuming the 90 days trading horizon New Residential is expected to generate 4.38 times less return on investment than OBSERVE MEDICAL. But when comparing it to its historical volatility, New Residential Investment is 18.83 times less risky than OBSERVE MEDICAL. It trades about 0.21 of its potential returns per unit of risk. OBSERVE MEDICAL ASA is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 42.00 in OBSERVE MEDICAL ASA on November 5, 2024 and sell it today you would lose (5.00) from holding OBSERVE MEDICAL ASA or give up 11.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
New Residential Investment vs. OBSERVE MEDICAL ASA
Performance |
| Timeline |
| New Residential Inve |
| OBSERVE MEDICAL ASA |
New Residential and OBSERVE MEDICAL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Residential and OBSERVE MEDICAL
The main advantage of trading using opposite New Residential and OBSERVE MEDICAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Residential position performs unexpectedly, OBSERVE MEDICAL 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 OBSERVE MEDICAL will offset losses from the drop in OBSERVE MEDICAL's long position.| New Residential vs. Commonwealth Bank of | New Residential vs. Bio Techne Corp | New Residential vs. Sunny Optical Technology | New Residential vs. VELA TECHNOLPLC LS 0001 |
| OBSERVE MEDICAL vs. Abbott Laboratories | OBSERVE MEDICAL vs. Abbott Laboratories | OBSERVE MEDICAL vs. Medtronic PLC | OBSERVE MEDICAL vs. Stryker |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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