Correlation Between New Residential and THRACE PLASTICS

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

Diversification Opportunities for New Residential and THRACE PLASTICS

0.58

Correlation Coefficient

New Residential  THRACE PLASTICS

Very weak diversification

The 3 months correlation between New and THRACE is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment and THRACE PLASTICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on THRACE PLASTICS 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 THRACE PLASTICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of THRACE PLASTICS has no effect on the direction of New Residential i.e., New Residential and THRACE PLASTICS go up and down completely randomly.

Pair Corralation between New Residential and THRACE PLASTICS

Assuming the 90 days trading horizon New Residential Investment is expected to generate 0.83 times more return on investment than THRACE PLASTICS. However, New Residential Investment is 1.21 times less risky than THRACE PLASTICS. It trades about 0.08 of its potential returns per unit of risk. THRACE PLASTICS is currently generating about 0.01 per unit of risk. If you would invest  658.00  in New Residential Investment on October 10, 2024 and sell it today you would earn a total of  422.00  from holding New Residential Investment or generate 64.13% return on investment over 90 days.

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

New Residential Investment  vs.  THRACE PLASTICS

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 unsteady basic indicators, New Residential reported solid returns over the last few months and may actually be approaching a breakup point.

THRACE PLASTICS

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in THRACE PLASTICS are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, THRACE PLASTICS may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with New Residential and THRACE PLASTICS

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

The idea behind New Residential Investment and THRACE PLASTICS 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..