Correlation Between London Security and New Residential
Can any of the company-specific risk be diversified away by investing in both London Security 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 London Security and New Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between London Security Plc and New Residential Investment, you can compare the effects of market volatilities on London Security 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 London Security with a short position of New Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of London Security and New Residential.
Diversification Opportunities for London Security and New Residential
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between London and New is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding London Security 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 London Security 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 London Security 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 London Security i.e., London Security and New Residential go up and down completely randomly.
Pair Corralation between London Security and New Residential
Assuming the 90 days trading horizon London Security is expected to generate 2.66 times less return on investment than New Residential. But when comparing it to its historical volatility, London Security Plc is 1.41 times less risky than New Residential. It trades about 0.03 of its potential returns per unit of risk. New Residential Investment is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 740.00 in New Residential Investment on September 3, 2024 and sell it today you would earn a total of 390.00 from holding New Residential Investment or generate 52.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.37% |
| Values | Daily Returns |
London Security Plc vs. New Residential Investment
Performance |
| Timeline |
| London Security Plc |
| New Residential Inve |
London Security and New Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with London Security and New Residential
The main advantage of trading using opposite London Security and New Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if London Security 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.| London Security vs. Griffin Mining | London Security vs. Lundin Mining Corp | London Security vs. Veolia Environnement VE | London Security vs. Caledonia Mining |
| 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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