Correlation Between Power Wind and Newretail

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

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

Diversification Opportunities for Power Wind and Newretail

-0.58

Correlation Coefficient

Power Wind  Newretail

Excellent diversification

The 3 months correlation between Power and Newretail is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Power Wind Health and Newretail Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newretail and Power Wind 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 Power Wind Health are associated (or correlated) with Newretail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newretail has no effect on the direction of Power Wind i.e., Power Wind and Newretail go up and down completely randomly.

Pair Corralation between Power Wind and Newretail

Assuming the 90 days trading horizon Power Wind Health is expected to under-perform the Newretail. But the stock apears to be less risky and, when comparing its historical volatility, Power Wind Health is 3.12 times less risky than Newretail. The stock trades about -0.09 of its potential returns per unit of risk. The Newretail Co is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,145  in Newretail Co on October 21, 2024 and sell it today you would earn a total of  475.00  from holding Newretail Co or generate 22.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Power Wind Health  vs.  Newretail Co

Power Wind Health

Risk-Adjusted Performance

0 of 100

Very Weak

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

Newretail

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Newretail Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Newretail showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Power Wind and Newretail

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

The idea behind Power Wind Health and Newretail 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.