Correlation Between River and New Residential
Can any of the company-specific risk be diversified away by investing in both River 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 River and New Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between River and Mercantile and New Residential Investment, you can compare the effects of market volatilities on River 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 River with a short position of New Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of River and New Residential.
Diversification Opportunities for River and New Residential
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between River and New is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding River and Mercantile 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 River 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 River and Mercantile 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 River i.e., River and New Residential go up and down completely randomly.
Pair Corralation between River and New Residential
Assuming the 90 days trading horizon River and Mercantile is expected to under-perform the New Residential. But the stock apears to be less risky and, when comparing its historical volatility, River and Mercantile is 1.84 times less risky than New Residential. The stock trades about -0.03 of its potential returns per unit of risk. The New Residential Investment is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 1,082 in New Residential Investment on November 3, 2024 and sell it today you would earn a total of 82.00 from holding New Residential Investment or generate 7.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
River and Mercantile vs. New Residential Investment
Performance |
| Timeline |
| River and Mercantile |
| New Residential Inve |
River and New Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with River and New Residential
The main advantage of trading using opposite River and New Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if River 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.| River vs. Fidelity National Information | River vs. Datalogic | River vs. Creo Medical Group | River vs. Advanced Medical Solutions |
| New Residential vs. Atalaya Mining | New Residential vs. Zoom Video Communications | New Residential vs. GreenX Metals | New Residential vs. Batm Advanced Communications |
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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