Correlation Between Neinor Homes and New Hope

Can any of the company-specific risk be diversified away by investing in both Neinor Homes and New Hope 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 Neinor Homes and New Hope into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Neinor Homes SA and New Hope, you can compare the effects of market volatilities on Neinor Homes and New Hope 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 Neinor Homes with a short position of New Hope. Check out your portfolio center. Please also check ongoing floating volatility patterns of Neinor Homes and New Hope.

Diversification Opportunities for Neinor Homes and New Hope

-0.05

Correlation Coefficient

Neinor Homes  New Hope

Good diversification

The 3 months correlation between Neinor and New is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Neinor Homes SA and New Hope in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Hope and Neinor Homes 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 Neinor Homes SA are associated (or correlated) with New Hope. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Hope has no effect on the direction of Neinor Homes i.e., Neinor Homes and New Hope go up and down completely randomly.

Pair Corralation between Neinor Homes and New Hope

Assuming the 90 days trading horizon Neinor Homes SA is expected to generate 0.69 times more return on investment than New Hope. However, Neinor Homes SA is 1.46 times less risky than New Hope. It trades about 0.16 of its potential returns per unit of risk. New Hope is currently generating about 0.06 per unit of risk. If you would invest  936.00  in Neinor Homes SA on October 22, 2024 and sell it today you would earn a total of  688.00  from holding Neinor Homes SA or generate 73.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.56%
Values	Daily Returns

Neinor Homes SA  vs.  New Hope

Neinor Homes SA

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Neinor Homes SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Neinor Homes may actually be approaching a critical reversion point that can send shares even higher in February 2025.

New Hope

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Hope has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, New Hope is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Neinor Homes and New Hope

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

The idea behind Neinor Homes SA and New Hope 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.