Correlation Between RMR and New England
Can any of the company-specific risk be diversified away by investing in both RMR and New England 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 RMR and New England into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RMR Group and New England Realty, you can compare the effects of market volatilities on RMR and New England 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 RMR with a short position of New England. Check out your portfolio center. Please also check ongoing floating volatility patterns of RMR and New England.
Diversification Opportunities for RMR and New England
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between RMR and New is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding RMR Group and New England Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New England Realty and RMR 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 RMR Group are associated (or correlated) with New England. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New England Realty has no effect on the direction of RMR i.e., RMR and New England go up and down completely randomly.
Pair Corralation between RMR and New England
Considering the 90-day investment horizon RMR Group is expected to under-perform the New England. But the stock apears to be less risky and, when comparing its historical volatility, RMR Group is 1.52 times less risky than New England. The stock trades about -0.23 of its potential returns per unit of risk. The New England Realty is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 8,250 in New England Realty on August 27, 2024 and sell it today you would lose (1.00) from holding New England Realty or give up 0.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 38.1% |
| Values | Daily Returns |
RMR Group vs. New England Realty
Performance |
| Timeline |
| RMR Group |
| New England Realty |
RMR and New England Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RMR and New England
The main advantage of trading using opposite RMR and New England positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RMR position performs unexpectedly, New England 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 England will offset losses from the drop in New England's long position.| RMR vs. Investcorp Credit Management | RMR vs. Medalist Diversified Reit | RMR vs. Aquagold International | RMR vs. Morningstar Unconstrained Allocation |
| New England vs. The Intergroup | New England vs. Transcontinental Realty Investors | New England vs. American Realty Investors | New England vs. Gyrodyne Company of |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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