Correlation Between New Residential and LBG Media
Can any of the company-specific risk be diversified away by investing in both New Residential and LBG Media 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 Residential and LBG Media into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Residential Investment and LBG Media PLC, you can compare the effects of market volatilities on New Residential and LBG Media 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 Residential with a short position of LBG Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Residential and LBG Media.
Diversification Opportunities for New Residential and LBG Media
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between New and LBG is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment and LBG Media PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LBG Media PLC and New Residential 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 Residential Investment are associated (or correlated) with LBG Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LBG Media PLC has no effect on the direction of New Residential i.e., New Residential and LBG Media go up and down completely randomly.
Pair Corralation between New Residential and LBG Media
Assuming the 90 days trading horizon New Residential is expected to generate 2.36 times less return on investment than LBG Media. But when comparing it to its historical volatility, New Residential Investment is 1.95 times less risky than LBG Media. It trades about 0.05 of its potential returns per unit of risk. LBG Media PLC is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 8,750 in LBG Media PLC on September 7, 2024 and sell it today you would earn a total of 3,150 from holding LBG Media PLC or generate 36.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
New Residential Investment vs. LBG Media PLC
Performance |
Timeline |
New Residential Inve |
LBG Media PLC |
New Residential and LBG Media Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with New Residential and LBG Media
The main advantage of trading using opposite New Residential and LBG Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Residential position performs unexpectedly, LBG Media 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 LBG Media will offset losses from the drop in LBG Media's long position.New Residential vs. Lendinvest PLC | New Residential vs. Neometals | New Residential vs. Coor Service Management | New Residential vs. Albion Technology General |
LBG Media vs. Symphony Environmental Technologies | LBG Media vs. Schweiter Technologies AG | LBG Media vs. Ashtead Technology Holdings | LBG Media vs. Check Point Software |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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