Correlation Between New Residential and TTW PCL

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

Diversification Opportunities for New Residential and TTW PCL

0.07

Correlation Coefficient

New Residential  TTW PCL

Significant diversification

The 3 months correlation between New and TTW is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment and TTW PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TTW PCL 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 TTW PCL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TTW PCL has no effect on the direction of New Residential i.e., New Residential and TTW PCL go up and down completely randomly.

Pair Corralation between New Residential and TTW PCL

Assuming the 90 days trading horizon New Residential Investment is expected to generate 0.02 times more return on investment than TTW PCL. However, New Residential Investment is 48.9 times less risky than TTW PCL. It trades about 0.09 of its potential returns per unit of risk. TTW PCL is currently generating about -0.16 per unit of risk. If you would invest  1,005  in New Residential Investment on December 19, 2024 and sell it today you would earn a total of  69.00  from holding New Residential Investment or generate 6.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

New Residential Investment  vs.  TTW PCL

New Residential Inve

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in New Residential Investment are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, New Residential may actually be approaching a critical reversion point that can send shares even higher in April 2025.

TTW PCL

Risk-Adjusted Performance

Very Weak

Over the last 90 days TTW PCL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with New Residential and TTW PCL

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

The idea behind New Residential Investment and TTW PCL 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .