Correlation Between CleanTech Lithium and New Residential
Can any of the company-specific risk be diversified away by investing in both CleanTech Lithium 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 CleanTech Lithium and New Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CleanTech Lithium plc and New Residential Investment, you can compare the effects of market volatilities on CleanTech Lithium 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 CleanTech Lithium with a short position of New Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of CleanTech Lithium and New Residential.
Diversification Opportunities for CleanTech Lithium and New Residential
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CleanTech and New is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding CleanTech Lithium plc 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 CleanTech Lithium 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 CleanTech Lithium plc 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 CleanTech Lithium i.e., CleanTech Lithium and New Residential go up and down completely randomly.
Pair Corralation between CleanTech Lithium and New Residential
Assuming the 90 days trading horizon CleanTech Lithium plc is expected to under-perform the New Residential. In addition to that, CleanTech Lithium is 3.96 times more volatile than New Residential Investment. It trades about -0.2 of its total potential returns per unit of risk. New Residential Investment is currently generating about -0.02 per unit of volatility. If you would invest 1,150 in New Residential Investment on September 3, 2024 and sell it today you would lose (20.00) from holding New Residential Investment or give up 1.74% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CleanTech Lithium plc vs. New Residential Investment
Performance |
| Timeline |
| CleanTech Lithium plc |
| New Residential Inve |
CleanTech Lithium and New Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CleanTech Lithium and New Residential
The main advantage of trading using opposite CleanTech Lithium and New Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CleanTech Lithium 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 CleanTech Lithium plc 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. CleanTech Lithium plc | New Residential vs. Pfeiffer Vacuum Technology | New Residential vs. Futura Medical | New Residential vs. Spotify Technology SA |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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