Correlation Between AOYAMA TRADING and New Residential
Can any of the company-specific risk be diversified away by investing in both AOYAMA TRADING and New Residential 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 AOYAMA TRADING and New Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AOYAMA TRADING and New Residential Investment, you can compare the effects of market volatilities on AOYAMA TRADING and New Residential 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 AOYAMA TRADING with a short position of New Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of AOYAMA TRADING and New Residential.
Diversification Opportunities for AOYAMA TRADING and New Residential
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between AOYAMA and New is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding AOYAMA TRADING and New Residential Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Residential Inve and AOYAMA TRADING 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 AOYAMA TRADING are associated (or correlated) with New Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Residential Inve has no effect on the direction of AOYAMA TRADING i.e., AOYAMA TRADING and New Residential go up and down completely randomly.
Pair Corralation between AOYAMA TRADING and New Residential
Assuming the 90 days horizon AOYAMA TRADING is expected to under-perform the New Residential. But the stock apears to be less risky and, when comparing its historical volatility, AOYAMA TRADING is 1.1 times less risky than New Residential. The stock trades about -0.2 of its potential returns per unit of risk. The New Residential Investment is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 1,020 in New Residential Investment on October 25, 2024 and sell it today you would earn a total of 56.00 from holding New Residential Investment or generate 5.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
AOYAMA TRADING vs. New Residential Investment
Performance |
| Timeline |
| AOYAMA TRADING |
| New Residential Inve |
AOYAMA TRADING and New Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AOYAMA TRADING and New Residential
The main advantage of trading using opposite AOYAMA TRADING and New Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AOYAMA TRADING position performs unexpectedly, New Residential 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 Residential will offset losses from the drop in New Residential's long position.The idea behind AOYAMA TRADING and New Residential Investment pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| New Residential vs. PLAYTIKA HOLDING DL 01 | New Residential vs. Ameriprise Financial | New Residential vs. Playtech plc | New Residential vs. PLAYWAY SA ZY 10 |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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