Correlation Between New Residential and Klépierre

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

Diversification Opportunities for New Residential and Klépierre

0.34

Correlation Coefficient

New Residential  Klépierre

Weak diversification

The 3 months correlation between New and Klépierre is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment and Klpierre SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Klpierre SA 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 Klépierre. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Klpierre SA has no effect on the direction of New Residential i.e., New Residential and Klépierre go up and down completely randomly.

Pair Corralation between New Residential and Klépierre

Assuming the 90 days trading horizon New Residential is expected to generate 2.4 times less return on investment than Klépierre. In addition to that, New Residential is 1.25 times more volatile than Klpierre SA. It trades about 0.07 of its total potential returns per unit of risk. Klpierre SA is currently generating about 0.21 per unit of volatility. If you would invest  2,706  in Klpierre SA on December 28, 2024 and sell it today you would earn a total of  390.00  from holding Klpierre SA or generate 14.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

New Residential Investment  vs.  Klpierre SA

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 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, New Residential is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Klpierre SA

Risk-Adjusted Performance

Solid

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

Pair Trading with New Residential and Klépierre

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

The idea behind New Residential Investment and Klpierre SA 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 .