Correlation Between Altria and Newlake Capital

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

By analyzing existing cross correlation between Altria Group and Newlake Capital Partners, you can compare the effects of market volatilities on Altria and Newlake Capital 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 Altria with a short position of Newlake Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Altria and Newlake Capital.

Diversification Opportunities for Altria and Newlake Capital

-0.45

Correlation Coefficient

Altria  Newlake Capital

Very good diversification

The 3 months correlation between Altria and Newlake is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Altria Group and Newlake Capital Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newlake Capital Partners and Altria 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 Altria Group are associated (or correlated) with Newlake Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newlake Capital Partners has no effect on the direction of Altria i.e., Altria and Newlake Capital go up and down completely randomly.

Pair Corralation between Altria and Newlake Capital

Allowing for the 90-day total investment horizon Altria Group is expected to generate 0.95 times more return on investment than Newlake Capital. However, Altria Group is 1.06 times less risky than Newlake Capital. It trades about 0.14 of its potential returns per unit of risk. Newlake Capital Partners is currently generating about -0.19 per unit of risk. If you would invest  5,281  in Altria Group on December 20, 2024 and sell it today you would earn a total of  514.00  from holding Altria Group or generate 9.73% return on investment over 90 days.

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

Altria Group  vs.  Newlake Capital Partners

Altria Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Altria Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Altria may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Newlake Capital Partners

Risk-Adjusted Performance

Very Weak

Over the last 90 days Newlake Capital Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Altria and Newlake Capital

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

The idea behind Altria Group and Newlake Capital Partners 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.