Correlation Between Newtek Business and Broadridge Financial

Can any of the company-specific risk be diversified away by investing in both Newtek Business and Broadridge Financial 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 Newtek Business and Broadridge Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Newtek Business Services and Broadridge Financial Solutions, you can compare the effects of market volatilities on Newtek Business and Broadridge Financial 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 Newtek Business with a short position of Broadridge Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Newtek Business and Broadridge Financial.

Diversification Opportunities for Newtek Business and Broadridge Financial

0.84

Correlation Coefficient

Newtek Business  Broadridge Financial

Very poor diversification

The 3 months correlation between Newtek and Broadridge is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Newtek Business Services and Broadridge Financial Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadridge Financial and Newtek Business 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 Newtek Business Services are associated (or correlated) with Broadridge Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broadridge Financial has no effect on the direction of Newtek Business i.e., Newtek Business and Broadridge Financial go up and down completely randomly.

Pair Corralation between Newtek Business and Broadridge Financial

Assuming the 90 days trading horizon Newtek Business is expected to generate 5.21 times less return on investment than Broadridge Financial. In addition to that, Newtek Business is 2.11 times more volatile than Broadridge Financial Solutions. It trades about 0.01 of its total potential returns per unit of risk. Broadridge Financial Solutions is currently generating about 0.09 per unit of volatility. If you would invest  12,332  in Broadridge Financial Solutions on September 28, 2024 and sell it today you would earn a total of  9,268  from holding Broadridge Financial Solutions or generate 75.15% return on investment over 90 days.

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

Newtek Business Services  vs.  Broadridge Financial Solutions

Newtek Business Services

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Newtek Business Services are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Newtek Business reported solid returns over the last few months and may actually be approaching a breakup point.

Broadridge Financial

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Broadridge Financial Solutions are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Broadridge Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Newtek Business and Broadridge Financial

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

The idea behind Newtek Business Services and Broadridge Financial Solutions 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.