Correlation Between New Momentum and Archon
Can any of the company-specific risk be diversified away by investing in both New Momentum and Archon 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 Archon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Momentum and Archon, you can compare the effects of market volatilities on New Momentum and Archon 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 Archon. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Momentum and Archon.
Diversification Opportunities for New Momentum and Archon
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between New and Archon is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding New Momentum and Archon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archon 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 Archon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Archon has no effect on the direction of New Momentum i.e., New Momentum and Archon go up and down completely randomly.
Pair Corralation between New Momentum and Archon
If you would invest 0.05 in New Momentum on August 31, 2024 and sell it today you would earn a total of 0.01 from holding New Momentum or generate 20.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Momentum vs. Archon
Performance |
| Timeline |
| New Momentum |
| Archon |
New Momentum and Archon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Momentum and Archon
The main advantage of trading using opposite New Momentum and Archon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Momentum position performs unexpectedly, Archon 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 Archon will offset losses from the drop in Archon's long position.| New Momentum vs. Booking Holdings | New Momentum vs. TripAdvisor | New Momentum vs. Airbnb Inc | New Momentum vs. Royal Caribbean Cruises |
| Archon vs. Century Casinos | Archon vs. Golden Entertainment | Archon vs. Monarch Casino Resort | Archon vs. Red Rock Resorts |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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