Correlation Between New Residential and Jenoptik

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

Diversification Opportunities for New Residential and Jenoptik

-0.01

Correlation Coefficient

New Residential  Jenoptik

Good diversification

The 3 months correlation between New and Jenoptik is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment and Jenoptik AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jenoptik AG 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 Jenoptik. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jenoptik AG has no effect on the direction of New Residential i.e., New Residential and Jenoptik go up and down completely randomly.

Pair Corralation between New Residential and Jenoptik

Assuming the 90 days trading horizon New Residential Investment is expected to generate 0.6 times more return on investment than Jenoptik. However, New Residential Investment is 1.67 times less risky than Jenoptik. It trades about 0.2 of its potential returns per unit of risk. Jenoptik AG is currently generating about -0.05 per unit of risk. If you would invest  942.00  in New Residential Investment on October 26, 2024 and sell it today you would earn a total of  134.00  from holding New Residential Investment or generate 14.23% return on investment over 90 days.

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

New Residential Investment  vs.  Jenoptik AG

New Residential Inve

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in New Residential Investment are ranked lower than 15 (%) 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.

Jenoptik AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jenoptik AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Jenoptik is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with New Residential and Jenoptik

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

The idea behind New Residential Investment and Jenoptik AG 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.