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

New Residential  LBG Media

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

New Residential Inve

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Residential Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, New Residential is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

LBG Media PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LBG Media PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

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.

The idea behind New Residential Investment and LBG Media PLC 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.

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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.