Correlation Between New Residential and Penta Ocean
Can any of the company-specific risk be diversified away by investing in both New Residential and Penta Ocean 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 Penta Ocean 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 Penta Ocean Construction Co, you can compare the effects of market volatilities on New Residential and Penta Ocean 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 Penta Ocean. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Residential and Penta Ocean.
Diversification Opportunities for New Residential and Penta Ocean
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between New and Penta is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment and Penta Ocean Construction Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penta Ocean Construc 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 Penta Ocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penta Ocean Construc has no effect on the direction of New Residential i.e., New Residential and Penta Ocean go up and down completely randomly.
Pair Corralation between New Residential and Penta Ocean
Assuming the 90 days trading horizon New Residential Investment is expected to generate 1.34 times more return on investment than Penta Ocean. However, New Residential is 1.34 times more volatile than Penta Ocean Construction Co. It trades about 0.21 of its potential returns per unit of risk. Penta Ocean Construction Co is currently generating about -0.02 per unit of risk. If you would invest 1,021 in New Residential Investment on October 29, 2024 and sell it today you would earn a total of 55.00 from holding New Residential Investment or generate 5.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Residential Investment vs. Penta Ocean Construction Co
Performance |
| Timeline |
| New Residential Inve |
| Penta Ocean Construc |
New Residential and Penta Ocean Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Residential and Penta Ocean
The main advantage of trading using opposite New Residential and Penta Ocean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Residential position performs unexpectedly, Penta Ocean 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 Penta Ocean will offset losses from the drop in Penta Ocean's long position.| New Residential vs. CHINA HUARONG ENERHD 50 | New Residential vs. Huntington Bancshares Incorporated | New Residential vs. NorAm Drilling AS | New Residential vs. Rheinmetall AG |
| Penta Ocean vs. Darden Restaurants | Penta Ocean vs. Chuangs China Investments | Penta Ocean vs. PSI Software AG | Penta Ocean vs. MAGIC SOFTWARE ENTR |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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