Correlation Between New Residential and Takeda Pharmaceutical

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

Diversification Opportunities for New Residential and Takeda Pharmaceutical

0.13

Correlation Coefficient

New Residential  Takeda Pharmaceutical

Average diversification

The 3 months correlation between New and Takeda is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment and Takeda Pharmaceutical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Takeda Pharmaceutical 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 Takeda Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Takeda Pharmaceutical has no effect on the direction of New Residential i.e., New Residential and Takeda Pharmaceutical go up and down completely randomly.

Pair Corralation between New Residential and Takeda Pharmaceutical

Assuming the 90 days trading horizon New Residential is expected to generate 1.72 times less return on investment than Takeda Pharmaceutical. But when comparing it to its historical volatility, New Residential Investment is 1.05 times less risky than Takeda Pharmaceutical. It trades about 0.07 of its potential returns per unit of risk. Takeda Pharmaceutical is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,250  in Takeda Pharmaceutical on December 29, 2024 and sell it today you would earn a total of  120.00  from holding Takeda Pharmaceutical or generate 9.6% return on investment over 90 days.

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

New Residential Investment  vs.  Takeda Pharmaceutical

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 newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Takeda Pharmaceutical

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Takeda Pharmaceutical are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Takeda Pharmaceutical may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with New Residential and Takeda Pharmaceutical

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

The idea behind New Residential Investment and Takeda Pharmaceutical 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.