Correlation Between Newtree CoLtd and Cherrybro CoLtd

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

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

Diversification Opportunities for Newtree CoLtd and Cherrybro CoLtd

-0.79

Correlation Coefficient

Newtree CoLtd  Cherrybro CoLtd

Pay attention - limited upside

The 3 months correlation between Newtree and Cherrybro is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Newtree CoLtd and Cherrybro coLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cherrybro coLtd and Newtree CoLtd 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 Newtree CoLtd are associated (or correlated) with Cherrybro CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cherrybro coLtd has no effect on the direction of Newtree CoLtd i.e., Newtree CoLtd and Cherrybro CoLtd go up and down completely randomly.

Pair Corralation between Newtree CoLtd and Cherrybro CoLtd

Assuming the 90 days trading horizon Newtree CoLtd is expected to under-perform the Cherrybro CoLtd. In addition to that, Newtree CoLtd is 1.02 times more volatile than Cherrybro coLtd. It trades about -0.02 of its total potential returns per unit of risk. Cherrybro coLtd is currently generating about -0.01 per unit of volatility. If you would invest  114,300  in Cherrybro coLtd on October 23, 2024 and sell it today you would lose (31,400) from holding Cherrybro coLtd or give up 27.47% of portfolio value over 90 days.

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

Newtree CoLtd  vs.  Cherrybro coLtd

Newtree CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Newtree CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Cherrybro coLtd

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cherrybro coLtd are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cherrybro CoLtd sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Newtree CoLtd and Cherrybro CoLtd

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

The idea behind Newtree CoLtd and Cherrybro coLtd 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.