Correlation Between New England and New York

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Can any of the company-specific risk be diversified away by investing in both New England and New York 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 England and New York into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New England Realty and New York City, you can compare the effects of market volatilities on New England and New York 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 England with a short position of New York. Check out your portfolio center. Please also check ongoing floating volatility patterns of New England and New York.

Diversification Opportunities for New England and New York

-0.24
  Correlation Coefficient

Very good diversification

The 3 months correlation between New and New is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding New England Realty and New York City in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New York City and New England 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 England Realty are associated (or correlated) with New York. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New York City has no effect on the direction of New England i.e., New England and New York go up and down completely randomly.

Pair Corralation between New England and New York

Considering the 90-day investment horizon New England Realty is expected to generate 17.29 times more return on investment than New York. However, New England is 17.29 times more volatile than New York City. It trades about 0.06 of its potential returns per unit of risk. New York City is currently generating about 0.02 per unit of risk. If you would invest  6,894  in New England Realty on August 27, 2024 and sell it today you would earn a total of  1,355  from holding New England Realty or generate 19.65% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy57.1%
ValuesDaily Returns

New England Realty  vs.  New York City

 Performance 
       Timeline  
New England Realty 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in New England Realty are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain technical and fundamental indicators, New England displayed solid returns over the last few months and may actually be approaching a breakup point.
New York City 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days New York City has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, New York is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

New England and New York Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with New England and New York

The main advantage of trading using opposite New England and New York positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New England position performs unexpectedly, New York 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 York will offset losses from the drop in New York's long position.
The idea behind New England Realty and New York City 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.
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.

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