Correlation Between New America and Starfleet Innotech

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

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

Diversification Opportunities for New America and Starfleet Innotech

0.52

Correlation Coefficient

New America  Starfleet Innotech

Very weak diversification

The 3 months correlation between New and Starfleet is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding New America High and Starfleet Innotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starfleet Innotech and New America 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 New America High are associated (or correlated) with Starfleet Innotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Starfleet Innotech has no effect on the direction of New America i.e., New America and Starfleet Innotech go up and down completely randomly.

Pair Corralation between New America and Starfleet Innotech

Considering the 90-day investment horizon New America High is expected to generate 0.03 times more return on investment than Starfleet Innotech. However, New America High is 32.58 times less risky than Starfleet Innotech. It trades about 0.14 of its potential returns per unit of risk. Starfleet Innotech is currently generating about -0.1 per unit of risk. If you would invest  814.00  in New America High on October 20, 2024 and sell it today you would earn a total of  8.00  from holding New America High or generate 0.98% return on investment over 90 days.

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

New America High  vs.  Starfleet Innotech

New America High

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in New America High are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, New America is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Starfleet Innotech

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Starfleet Innotech are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady forward indicators, Starfleet Innotech displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with New America and Starfleet Innotech

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

The idea behind New America High and Starfleet Innotech 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.