Correlation Between Butterfly Network and Newtopia

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

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

Diversification Opportunities for Butterfly Network and Newtopia

0.0

Correlation Coefficient

Butterfly Network  Newtopia

Pay attention - limited upside

The 3 months correlation between Butterfly and Newtopia is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Butterfly Network and Newtopia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newtopia and Butterfly Network 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 Butterfly Network are associated (or correlated) with Newtopia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newtopia has no effect on the direction of Butterfly Network i.e., Butterfly Network and Newtopia go up and down completely randomly.

Pair Corralation between Butterfly Network and Newtopia

Given the investment horizon of 90 days Butterfly Network is expected to under-perform the Newtopia. But the stock apears to be less risky and, when comparing its historical volatility, Butterfly Network is 2.8 times less risky than Newtopia. The stock trades about -0.04 of its potential returns per unit of risk. The Newtopia is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  0.14  in Newtopia on December 30, 2024 and sell it today you would lose (0.09) from holding Newtopia or give up 64.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.38%
Values	Daily Returns

Butterfly Network  vs.  Newtopia

Butterfly Network

Risk-Adjusted Performance

Very Weak

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

Newtopia

Risk-Adjusted Performance

Modest

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

Pair Trading with Butterfly Network and Newtopia

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

The idea behind Butterfly Network and Newtopia 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.

Check out your portfolio center.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.