Correlation Between Global Brands and New Era
Can any of the company-specific risk be diversified away by investing in both Global Brands and New Era 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 Global Brands and New Era into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Brands Manufacture and New Era Electronics, you can compare the effects of market volatilities on Global Brands and New Era 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 Global Brands with a short position of New Era. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Brands and New Era.
Diversification Opportunities for Global Brands and New Era
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Global and New is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Global Brands Manufacture and New Era Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Era Electronics and Global Brands 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 Global Brands Manufacture are associated (or correlated) with New Era. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Era Electronics has no effect on the direction of Global Brands i.e., Global Brands and New Era go up and down completely randomly.
Pair Corralation between Global Brands and New Era
Assuming the 90 days trading horizon Global Brands Manufacture is expected to under-perform the New Era. But the stock apears to be less risky and, when comparing its historical volatility, Global Brands Manufacture is 2.82 times less risky than New Era. The stock trades about -0.17 of its potential returns per unit of risk. The New Era Electronics is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 12,150 in New Era Electronics on September 12, 2024 and sell it today you would earn a total of 50.00 from holding New Era Electronics or generate 0.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Brands Manufacture vs. New Era Electronics
Performance |
| Timeline |
| Global Brands Manufacture |
| New Era Electronics |
Global Brands and New Era Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Brands and New Era
The main advantage of trading using opposite Global Brands and New Era positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Brands position performs unexpectedly, New Era 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 New Era will offset losses from the drop in New Era's long position.| Global Brands vs. HannStar Board Corp | Global Brands vs. ITEQ Corp | Global Brands vs. Unitech Printed Circuit | Global Brands vs. Career Technology MFG |
| New Era vs. Microtips Technology | New Era vs. Voltronic Power Technology | New Era vs. Asia Metal Industries | New Era vs. China Metal Products |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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