Correlation Between New Residential and LIFENET INSURANCE

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

Diversification Opportunities for New Residential and LIFENET INSURANCE

0.45

Correlation Coefficient

New Residential  LIFENET INSURANCE

Very weak diversification

The 3 months correlation between New and LIFENET is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment and LIFENET INSURANCE CO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LIFENET INSURANCE 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 LIFENET INSURANCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LIFENET INSURANCE has no effect on the direction of New Residential i.e., New Residential and LIFENET INSURANCE go up and down completely randomly.

Pair Corralation between New Residential and LIFENET INSURANCE

Assuming the 90 days trading horizon New Residential Investment is expected to generate 0.53 times more return on investment than LIFENET INSURANCE. However, New Residential Investment is 1.89 times less risky than LIFENET INSURANCE. It trades about -0.07 of its potential returns per unit of risk. LIFENET INSURANCE CO is currently generating about -0.49 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.  LIFENET INSURANCE CO

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 fragile basic indicators, New Residential may actually be approaching a critical reversion point that can send shares even higher in February 2025.

LIFENET INSURANCE

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in LIFENET INSURANCE CO are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, LIFENET INSURANCE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with New Residential and LIFENET INSURANCE

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

The idea behind New Residential Investment and LIFENET INSURANCE CO 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.

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 Transaction History module to view history of all your transactions and understand their impact on performance.