Correlation Between Gentex and New Residential

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

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

Diversification Opportunities for Gentex and New Residential

0.65

Correlation Coefficient

Gentex  New Residential

Poor diversification

The 3 months correlation between Gentex and New is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Gentex 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 Gentex 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 Gentex 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 Gentex i.e., Gentex and New Residential go up and down completely randomly.

Pair Corralation between Gentex and New Residential

Assuming the 90 days horizon Gentex is expected to generate 1.7 times less return on investment than New Residential. In addition to that, Gentex is 1.54 times more volatile than New Residential Investment. It trades about 0.06 of its total potential returns per unit of risk. New Residential Investment is currently generating about 0.15 per unit of volatility. If you would invest  978.00  in New Residential Investment on September 23, 2024 and sell it today you would earn a total of  70.00  from holding New Residential Investment or generate 7.16% return on investment over 90 days.

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

Gentex  vs.  New Residential Investment

Gentex

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gentex are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Gentex is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

New Residential Inve

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in New Residential Investment are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, New Residential is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Gentex and New Residential

The main advantage of trading using opposite Gentex and New Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gentex 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 Gentex 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 Transaction History module to view history of all your transactions and understand their impact on performance.