Correlation Between Newretail and President Chain

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

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

Diversification Opportunities for Newretail and President Chain

0.3

Correlation Coefficient

Newretail  President Chain

Weak diversification

The 3 months correlation between Newretail and President is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Newretail Co and President Chain Store in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on President Chain Store and Newretail 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 Newretail Co are associated (or correlated) with President Chain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of President Chain Store has no effect on the direction of Newretail i.e., Newretail and President Chain go up and down completely randomly.

Pair Corralation between Newretail and President Chain

Assuming the 90 days trading horizon Newretail Co is expected to under-perform the President Chain. In addition to that, Newretail is 5.06 times more volatile than President Chain Store. It trades about -0.15 of its total potential returns per unit of risk. President Chain Store is currently generating about -0.07 per unit of volatility. If you would invest  26,400  in President Chain Store on December 30, 2024 and sell it today you would lose (700.00) from holding President Chain Store or give up 2.65% of portfolio value over 90 days.

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

Newretail Co  vs.  President Chain Store

Newretail

Risk-Adjusted Performance

Very Weak

Over the last 90 days Newretail Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

President Chain Store

Risk-Adjusted Performance

Very Weak

Over the last 90 days President Chain Store has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, President Chain is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Newretail and President Chain

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

The idea behind Newretail Co and President Chain Store 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.