Correlation Between New Residential and REINET INVESTMENTS
Can any of the company-specific risk be diversified away by investing in both New Residential and REINET INVESTMENTS 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 REINET INVESTMENTS 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 REINET INVESTMENTS SCA, you can compare the effects of market volatilities on New Residential and REINET INVESTMENTS 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 REINET INVESTMENTS. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Residential and REINET INVESTMENTS.
Diversification Opportunities for New Residential and REINET INVESTMENTS
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between New and REINET is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment and REINET INVESTMENTS SCA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REINET INVESTMENTS SCA 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 REINET INVESTMENTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REINET INVESTMENTS SCA has no effect on the direction of New Residential i.e., New Residential and REINET INVESTMENTS go up and down completely randomly.
Pair Corralation between New Residential and REINET INVESTMENTS
Assuming the 90 days trading horizon New Residential is expected to generate 3.46 times less return on investment than REINET INVESTMENTS. But when comparing it to its historical volatility, New Residential Investment is 2.72 times less risky than REINET INVESTMENTS. It trades about 0.02 of its potential returns per unit of risk. REINET INVESTMENTS SCA is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,345 in REINET INVESTMENTS SCA on August 31, 2024 and sell it today you would earn a total of 75.00 from holding REINET INVESTMENTS SCA or generate 3.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Residential Investment vs. REINET INVESTMENTS SCA
Performance |
| Timeline |
| New Residential Inve |
| REINET INVESTMENTS SCA |
New Residential and REINET INVESTMENTS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Residential and REINET INVESTMENTS
The main advantage of trading using opposite New Residential and REINET INVESTMENTS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Residential position performs unexpectedly, REINET INVESTMENTS 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 REINET INVESTMENTS will offset losses from the drop in REINET INVESTMENTS's long position.| New Residential vs. MGIC INVESTMENT | New Residential vs. Perseus Mining Limited | New Residential vs. GRIFFIN MINING LTD | New Residential vs. ECHO INVESTMENT ZY |
| REINET INVESTMENTS vs. Ameriprise Financial | REINET INVESTMENTS vs. State Street | REINET INVESTMENTS vs. Ares Management Corp | REINET INVESTMENTS vs. Superior Plus Corp |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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