Correlation Between New Residential and DOCDATA

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

Diversification Opportunities for New Residential and DOCDATA

-0.73

Correlation Coefficient

New Residential  DOCDATA

Pay attention - limited upside

The 3 months correlation between New and DOCDATA is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment and DOCDATA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DOCDATA 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 DOCDATA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DOCDATA has no effect on the direction of New Residential i.e., New Residential and DOCDATA go up and down completely randomly.

Pair Corralation between New Residential and DOCDATA

Assuming the 90 days trading horizon New Residential Investment is expected to generate 0.32 times more return on investment than DOCDATA. However, New Residential Investment is 3.15 times less risky than DOCDATA. It trades about 0.22 of its potential returns per unit of risk. DOCDATA is currently generating about -0.09 per unit of risk. If you would invest  940.00  in New Residential Investment on October 7, 2024 and sell it today you would earn a total of  140.00  from holding New Residential Investment or generate 14.89% return on investment over 90 days.

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

New Residential Investment  vs.  DOCDATA

New Residential Inve

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in New Residential Investment are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, New Residential reported solid returns over the last few months and may actually be approaching a breakup point.

DOCDATA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DOCDATA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with New Residential and DOCDATA

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

The idea behind New Residential Investment and DOCDATA 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 Stocks Directory module to find actively traded stocks across global markets.