Correlation Between New Momentum and Global Acquisitions
Can any of the company-specific risk be diversified away by investing in both New Momentum and Global Acquisitions 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 Momentum and Global Acquisitions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Momentum and Global Acquisitions, you can compare the effects of market volatilities on New Momentum and Global Acquisitions 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 Momentum with a short position of Global Acquisitions. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Momentum and Global Acquisitions.
Diversification Opportunities for New Momentum and Global Acquisitions
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between New and Global is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding New Momentum and Global Acquisitions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Acquisitions and New Momentum 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 Momentum are associated (or correlated) with Global Acquisitions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Acquisitions has no effect on the direction of New Momentum i.e., New Momentum and Global Acquisitions go up and down completely randomly.
Pair Corralation between New Momentum and Global Acquisitions
Given the investment horizon of 90 days New Momentum is expected to generate 4.2 times less return on investment than Global Acquisitions. But when comparing it to its historical volatility, New Momentum is 2.6 times less risky than Global Acquisitions. It trades about 0.13 of its potential returns per unit of risk. Global Acquisitions is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 100.00 in Global Acquisitions on August 31, 2024 and sell it today you would earn a total of 80.00 from holding Global Acquisitions or generate 80.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Momentum vs. Global Acquisitions
Performance |
| Timeline |
| New Momentum |
| Global Acquisitions |
New Momentum and Global Acquisitions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Momentum and Global Acquisitions
The main advantage of trading using opposite New Momentum and Global Acquisitions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Momentum position performs unexpectedly, Global Acquisitions 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 Global Acquisitions will offset losses from the drop in Global Acquisitions' long position.| New Momentum vs. Booking Holdings | New Momentum vs. TripAdvisor | New Momentum vs. Airbnb Inc | New Momentum vs. Royal Caribbean Cruises |
| Global Acquisitions vs. Ambase Corp | Global Acquisitions vs. American Commerce Solutions | Global Acquisitions vs. Altex Industries | Global Acquisitions vs. Advanced Oxygen Technologies |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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