Correlation Between New America and Urbana

Can any of the company-specific risk be diversified away by investing in both New America and Urbana 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 Urbana 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 Urbana, you can compare the effects of market volatilities on New America and Urbana 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 Urbana. Check out your portfolio center. Please also check ongoing floating volatility patterns of New America and Urbana.

Diversification Opportunities for New America and Urbana

0.56

Correlation Coefficient

New America  Urbana

Very weak diversification

The 3 months correlation between New and Urbana is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding New America High and Urbana in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Urbana 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 Urbana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Urbana has no effect on the direction of New America i.e., New America and Urbana go up and down completely randomly.

Pair Corralation between New America and Urbana

Considering the 90-day investment horizon New America is expected to generate 8.47 times less return on investment than Urbana. But when comparing it to its historical volatility, New America High is 3.39 times less risky than Urbana. It trades about 0.05 of its potential returns per unit of risk. Urbana is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  374.00  in Urbana on September 16, 2024 and sell it today you would earn a total of  48.00  from holding Urbana or generate 12.83% 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.  Urbana

New America High

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in New America High are ranked lower than 3 (%) 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.

Urbana

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Urbana are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Urbana may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with New America and Urbana

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

The idea behind New America High and Urbana 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.