Correlation Between New Residential and Transportadora
Can any of the company-specific risk be diversified away by investing in both New Residential and Transportadora 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 Transportadora 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 Transportadora de Gas, you can compare the effects of market volatilities on New Residential and Transportadora 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 Transportadora. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Residential and Transportadora.
Diversification Opportunities for New Residential and Transportadora
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between New and Transportadora is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment and Transportadora de Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transportadora de Gas 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 Transportadora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transportadora de Gas has no effect on the direction of New Residential i.e., New Residential and Transportadora go up and down completely randomly.
Pair Corralation between New Residential and Transportadora
Assuming the 90 days trading horizon New Residential is expected to generate 6.91 times less return on investment than Transportadora. But when comparing it to its historical volatility, New Residential Investment is 5.45 times less risky than Transportadora. It trades about 0.2 of its potential returns per unit of risk. Transportadora de Gas is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 2,040 in Transportadora de Gas on September 12, 2024 and sell it today you would earn a total of 600.00 from holding Transportadora de Gas or generate 29.41% 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. Transportadora de Gas
Performance |
| Timeline |
| New Residential Inve |
| Transportadora de Gas |
New Residential and Transportadora Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Residential and Transportadora
The main advantage of trading using opposite New Residential and Transportadora positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Residential position performs unexpectedly, Transportadora 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 Transportadora will offset losses from the drop in Transportadora's long position.| New Residential vs. PKSHA TECHNOLOGY INC | New Residential vs. FARO Technologies | New Residential vs. CI GAMES SA | New Residential vs. EAST SIDE GAMES |
| Transportadora vs. Apple Inc | Transportadora vs. Apple Inc | Transportadora vs. Apple Inc | Transportadora vs. Apple Inc |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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