Correlation Between Newretail and Ardentec

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

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

Diversification Opportunities for Newretail and Ardentec

-0.66

Correlation Coefficient

Newretail  Ardentec

Excellent diversification

The 3 months correlation between Newretail and Ardentec is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Newretail Co and Ardentec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ardentec 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 Ardentec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ardentec has no effect on the direction of Newretail i.e., Newretail and Ardentec go up and down completely randomly.

Pair Corralation between Newretail and Ardentec

Assuming the 90 days trading horizon Newretail Co is expected to under-perform the Ardentec. But the stock apears to be less risky and, when comparing its historical volatility, Newretail Co is 1.01 times less risky than Ardentec. The stock trades about -0.12 of its potential returns per unit of risk. The Ardentec is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  5,420  in Ardentec on December 27, 2024 and sell it today you would earn a total of  1,830  from holding Ardentec or generate 33.76% return on investment over 90 days.

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

Newretail Co  vs.  Ardentec

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.

Ardentec

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ardentec are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Ardentec showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Newretail and Ardentec

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

The idea behind Newretail Co and Ardentec 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.