Correlation Between New Residential and CITY OFFICE

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

Diversification Opportunities for New Residential and CITY OFFICE

0.52

Correlation Coefficient

New Residential  CITY OFFICE

Very weak diversification

The 3 months correlation between New and CITY is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment and CITY OFFICE REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITY OFFICE REIT 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 CITY OFFICE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITY OFFICE REIT has no effect on the direction of New Residential i.e., New Residential and CITY OFFICE go up and down completely randomly.

Pair Corralation between New Residential and CITY OFFICE

Assuming the 90 days trading horizon New Residential Investment is expected to generate 0.38 times more return on investment than CITY OFFICE. However, New Residential Investment is 2.64 times less risky than CITY OFFICE. It trades about -0.07 of its potential returns per unit of risk. CITY OFFICE REIT is currently generating about -0.04 per unit of risk. If you would invest  1,057  in New Residential Investment on October 4, 2024 and sell it today you would lose (11.00) from holding New Residential Investment or give up 1.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

New Residential Investment  vs.  CITY OFFICE REIT

New Residential Inve

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in New Residential Investment are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, New Residential may actually be approaching a critical reversion point that can send shares even higher in February 2025.

CITY OFFICE REIT

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CITY OFFICE REIT are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CITY OFFICE may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with New Residential and CITY OFFICE

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

The idea behind New Residential Investment and CITY OFFICE REIT 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.