Correlation Between New Residential and United States
Can any of the company-specific risk be diversified away by investing in both New Residential and United States 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 United States 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 United States Steel, you can compare the effects of market volatilities on New Residential and United States 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 United States. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Residential and United States.
Diversification Opportunities for New Residential and United States
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between New and United is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment and United States Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Steel 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 United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Steel has no effect on the direction of New Residential i.e., New Residential and United States go up and down completely randomly.
Pair Corralation between New Residential and United States
Assuming the 90 days trading horizon New Residential is expected to generate 1.34 times less return on investment than United States. But when comparing it to its historical volatility, New Residential Investment is 2.14 times less risky than United States. It trades about 0.07 of its potential returns per unit of risk. United States Steel is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,365 in United States Steel on September 2, 2024 and sell it today you would earn a total of 1,425 from holding United States Steel or generate 60.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Residential Investment vs. United States Steel
Performance |
| Timeline |
| New Residential Inve |
| United States Steel |
New Residential and United States Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Residential and United States
The main advantage of trading using opposite New Residential and United States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Residential position performs unexpectedly, United States 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 United States will offset losses from the drop in United States' long position.| New Residential vs. The Bank of | New Residential vs. Allianz SE | New Residential vs. Sixt SE | New Residential vs. China Construction Bank |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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