Correlation Between New Residential and G-III APPAREL

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

Diversification Opportunities for New Residential and G-III APPAREL

0.63

Correlation Coefficient

New Residential  G-III APPAREL

Poor diversification

The 3 months correlation between New and G-III is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment and G III APPAREL GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on G III APPAREL 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 G-III APPAREL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of G III APPAREL has no effect on the direction of New Residential i.e., New Residential and G-III APPAREL go up and down completely randomly.

Pair Corralation between New Residential and G-III APPAREL

Assuming the 90 days trading horizon New Residential is expected to generate 1.16 times less return on investment than G-III APPAREL. But when comparing it to its historical volatility, New Residential Investment is 2.39 times less risky than G-III APPAREL. It trades about 0.24 of its potential returns per unit of risk. G III APPAREL GROUP is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,960  in G III APPAREL GROUP on October 9, 2024 and sell it today you would earn a total of  160.00  from holding G III APPAREL GROUP or generate 5.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.12%
Values	Daily Returns

New Residential Investment  vs.  G III APPAREL GROUP

New Residential Inve

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in New Residential Investment are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, New Residential reported solid returns over the last few months and may actually be approaching a breakup point.

G III APPAREL

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in G III APPAREL GROUP are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, G-III APPAREL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with New Residential and G-III APPAREL

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

The idea behind New Residential Investment and G III APPAREL GROUP 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.