Correlation Between PG E and New Residential
Can any of the company-specific risk be diversified away by investing in both PG E 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 PG E and New Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PG E P6 and New Residential Investment, you can compare the effects of market volatilities on PG E 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 PG E with a short position of New Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of PG E and New Residential.
Diversification Opportunities for PG E and New Residential
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between PCG6 and New is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding PG E P6 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 PG E 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 PG E P6 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 PG E i.e., PG E and New Residential go up and down completely randomly.
Pair Corralation between PG E and New Residential
Assuming the 90 days trading horizon PG E P6 is expected to under-perform the New Residential. In addition to that, PG E is 1.14 times more volatile than New Residential Investment. It trades about -0.03 of its total potential returns per unit of risk. New Residential Investment is currently generating about 0.23 per unit of volatility. If you would invest 1,006 in New Residential Investment on September 13, 2024 and sell it today you would earn a total of 47.00 from holding New Residential Investment or generate 4.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
PG E P6 vs. New Residential Investment
Performance |
| Timeline |
| PG E P6 |
| New Residential Inve |
PG E and New Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PG E and New Residential
The main advantage of trading using opposite PG E and New Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PG E 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 PG E P6 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. PLAYTIKA HOLDING DL 01 | New Residential vs. Nine Dragons Paper | New Residential vs. Sunstone Hotel Investors | New Residential vs. Onxeo 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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