Correlation Between Japan Asia and New Residential

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

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

Diversification Opportunities for Japan Asia and New Residential

-0.17

Correlation Coefficient

Japan Asia  New Residential

Good diversification

The 3 months correlation between Japan and New is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Japan Asia Investment 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 Japan Asia 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 Japan Asia Investment 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 Japan Asia i.e., Japan Asia and New Residential go up and down completely randomly.

Pair Corralation between Japan Asia and New Residential

Assuming the 90 days horizon Japan Asia Investment is expected to generate 2.2 times more return on investment than New Residential. However, Japan Asia is 2.2 times more volatile than New Residential Investment. It trades about 0.17 of its potential returns per unit of risk. New Residential Investment is currently generating about 0.06 per unit of risk. If you would invest  123.00  in Japan Asia Investment on December 20, 2024 and sell it today you would earn a total of  37.00  from holding Japan Asia Investment or generate 30.08% return on investment over 90 days.

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

Japan Asia Investment  vs.  New Residential Investment

Japan Asia Investment

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Asia Investment are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Japan Asia reported solid returns over the last few months and may actually be approaching a breakup point.

New Residential Inve

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in New Residential Investment are ranked lower than 5 (%) 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 Japan Asia and New Residential

The main advantage of trading using opposite Japan Asia and New Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Asia 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 Japan Asia Investment 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.