Correlation Between Great Elm and Newtek Business

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

By analyzing existing cross correlation between Great Elm Capital and Newtek Business Services, you can compare the effects of market volatilities on Great Elm and Newtek Business 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 Great Elm with a short position of Newtek Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Elm and Newtek Business.

Diversification Opportunities for Great Elm and Newtek Business

0.86

Correlation Coefficient

Great Elm  Newtek Business

Very poor diversification

The 3 months correlation between Great and Newtek is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Great Elm Capital and Newtek Business Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newtek Business Services and Great Elm 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 Great Elm Capital are associated (or correlated) with Newtek Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newtek Business Services has no effect on the direction of Great Elm i.e., Great Elm and Newtek Business go up and down completely randomly.

Pair Corralation between Great Elm and Newtek Business

If you would invest (100.00) in Newtek Business Services on September 15, 2024 and sell it today you would earn a total of  100.00  from holding Newtek Business Services or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	0.0%
Values	Daily Returns

Great Elm Capital  vs.  Newtek Business Services

Great Elm Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Great Elm Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Great Elm is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Newtek Business Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Newtek Business Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Newtek Business is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Great Elm and Newtek Business

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

The idea behind Great Elm Capital and Newtek Business Services 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.