Correlation Between New World and Bank of East

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

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

Diversification Opportunities for New World and Bank of East

0.17

Correlation Coefficient

New World  Bank of East

Average diversification

The 3 months correlation between New and Bank is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding New World Development and Bank of East in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of East and New World 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 World Development are associated (or correlated) with Bank of East. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of East has no effect on the direction of New World i.e., New World and Bank of East go up and down completely randomly.

Pair Corralation between New World and Bank of East

Assuming the 90 days horizon New World is expected to generate 1.58 times less return on investment than Bank of East. In addition to that, New World is 4.56 times more volatile than Bank of East. It trades about 0.03 of its total potential returns per unit of risk. Bank of East is currently generating about 0.19 per unit of volatility. If you would invest  126.00  in Bank of East on December 19, 2024 and sell it today you would earn a total of  26.00  from holding Bank of East or generate 20.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.55%
Values	Daily Returns

New World Development  vs.  Bank of East

New World Development

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in New World Development are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, New World showed solid returns over the last few months and may actually be approaching a breakup point.

Bank of East

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of East are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Bank of East showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with New World and Bank of East

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

The idea behind New World Development and Bank of East 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.