Correlation Between Settlebank and NewFlex Technology

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

By analyzing existing cross correlation between Settlebank and NewFlex Technology Co, you can compare the effects of market volatilities on Settlebank and NewFlex Technology 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 Settlebank with a short position of NewFlex Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Settlebank and NewFlex Technology.

Diversification Opportunities for Settlebank and NewFlex Technology

0.08

Correlation Coefficient

Settlebank  NewFlex Technology

Significant diversification

The 3 months correlation between Settlebank and NewFlex is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Settlebank and NewFlex Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NewFlex Technology and Settlebank 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 Settlebank are associated (or correlated) with NewFlex Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NewFlex Technology has no effect on the direction of Settlebank i.e., Settlebank and NewFlex Technology go up and down completely randomly.

Pair Corralation between Settlebank and NewFlex Technology

Assuming the 90 days trading horizon Settlebank is expected to generate 9.52 times less return on investment than NewFlex Technology. But when comparing it to its historical volatility, Settlebank is 1.36 times less risky than NewFlex Technology. It trades about 0.01 of its potential returns per unit of risk. NewFlex Technology Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  449,000  in NewFlex Technology Co on December 2, 2024 and sell it today you would earn a total of  48,000  from holding NewFlex Technology Co or generate 10.69% return on investment over 90 days.

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

Settlebank  vs.  NewFlex Technology Co

Settlebank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Settlebank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Settlebank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

NewFlex Technology

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NewFlex Technology Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, NewFlex Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Settlebank and NewFlex Technology

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

The idea behind Settlebank and NewFlex Technology Co 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.