Correlation Between Gear4music Plc and New Residential

Can any of the company-specific risk be diversified away by investing in both Gear4music Plc and New Residential 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 Gear4music Plc and New Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gear4music Plc and New Residential Investment, you can compare the effects of market volatilities on Gear4music Plc and New Residential 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 Gear4music Plc with a short position of New Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gear4music Plc and New Residential.

Diversification Opportunities for Gear4music Plc and New Residential

0.58

Correlation Coefficient

Gear4music Plc  New Residential

Very weak diversification

The 3 months correlation between Gear4music and New is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Gear4music Plc and New Residential Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Residential Inve and Gear4music Plc 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 Gear4music Plc are associated (or correlated) with New Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Residential Inve has no effect on the direction of Gear4music Plc i.e., Gear4music Plc and New Residential go up and down completely randomly.

Pair Corralation between Gear4music Plc and New Residential

Assuming the 90 days trading horizon Gear4music Plc is expected to generate 4.01 times less return on investment than New Residential. In addition to that, Gear4music Plc is 2.31 times more volatile than New Residential Investment. It trades about 0.01 of its total potential returns per unit of risk. New Residential Investment is currently generating about 0.1 per unit of volatility. If you would invest  1,078  in New Residential Investment on September 4, 2024 and sell it today you would earn a total of  45.00  from holding New Residential Investment or generate 4.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.67%
Values	Daily Returns

Gear4music Plc  vs.  New Residential Investment

Gear4music Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gear4music Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

New Residential Inve

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Residential Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, New Residential is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Gear4music Plc and New Residential

The main advantage of trading using opposite Gear4music Plc and New Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gear4music Plc position performs unexpectedly, New Residential 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 New Residential will offset losses from the drop in New Residential's long position.

The idea behind Gear4music Plc and New Residential Investment 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.