Correlation Between New World and Stratus Properties

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

Diversification Opportunities for New World and Stratus Properties

-0.01

Correlation Coefficient

New World  Stratus Properties

Good diversification

The 3 months correlation between New and Stratus is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding New World Development and Stratus Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stratus Properties 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 Stratus Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stratus Properties has no effect on the direction of New World i.e., New World and Stratus Properties go up and down completely randomly.

Pair Corralation between New World and Stratus Properties

Assuming the 90 days horizon New World Development is expected to generate 3.83 times more return on investment than Stratus Properties. However, New World is 3.83 times more volatile than Stratus Properties. It trades about 0.05 of its potential returns per unit of risk. Stratus Properties is currently generating about -0.05 per unit of risk. If you would invest  35.00  in New World Development on December 28, 2024 and sell it today you would earn a total of  1.00  from holding New World Development or generate 2.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

New World Development  vs.  Stratus Properties

New World Development

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in New World Development are ranked lower than 4 (%) 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.

Stratus Properties

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stratus Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with New World and Stratus Properties

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

The idea behind New World Development and Stratus Properties 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 CEOs Directory module to screen CEOs from public companies around the world.