Correlation Between New Residential and Lindsell Train

Can any of the company-specific risk be diversified away by investing in both New Residential and Lindsell Train 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 Lindsell Train 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 Lindsell Train Investment, you can compare the effects of market volatilities on New Residential and Lindsell Train 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 Lindsell Train. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Residential and Lindsell Train.

Diversification Opportunities for New Residential and Lindsell Train

0.19

Correlation Coefficient

New Residential  Lindsell Train

Average diversification

The 3 months correlation between New and Lindsell is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment and Lindsell Train Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lindsell Train Investment 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 Lindsell Train. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lindsell Train Investment has no effect on the direction of New Residential i.e., New Residential and Lindsell Train go up and down completely randomly.

Pair Corralation between New Residential and Lindsell Train

Assuming the 90 days trading horizon New Residential Investment is expected to generate 1.67 times more return on investment than Lindsell Train. However, New Residential is 1.67 times more volatile than Lindsell Train Investment. It trades about 0.05 of its potential returns per unit of risk. Lindsell Train Investment is currently generating about -0.03 per unit of risk. If you would invest  722.00  in New Residential Investment on October 10, 2024 and sell it today you would earn a total of  377.00  from holding New Residential Investment or generate 52.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

New Residential Investment  vs.  Lindsell Train Investment

New Residential Inve

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in New Residential Investment are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. 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.

Lindsell Train Investment

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lindsell Train Investment are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Lindsell Train may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with New Residential and Lindsell Train

The main advantage of trading using opposite New Residential and Lindsell Train positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Residential position performs unexpectedly, Lindsell Train 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 Lindsell Train will offset losses from the drop in Lindsell Train's long position.

The idea behind New Residential Investment and Lindsell Train 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.

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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.