Correlation Between New Amer and Regional Management

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

By analyzing existing cross correlation between New Amer Energy and Regional Management Corp, you can compare the effects of market volatilities on New Amer and Regional Management 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 Amer with a short position of Regional Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Amer and Regional Management.

Diversification Opportunities for New Amer and Regional Management

0.2

Correlation Coefficient

New Amer  Regional Management

Modest diversification

The 3 months correlation between New and Regional is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding New Amer Energy and Regional Management Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regional Management Corp and New Amer 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 Amer Energy are associated (or correlated) with Regional Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regional Management Corp has no effect on the direction of New Amer i.e., New Amer and Regional Management go up and down completely randomly.

Pair Corralation between New Amer and Regional Management

Given the investment horizon of 90 days New Amer Energy is expected to generate 15.16 times more return on investment than Regional Management. However, New Amer is 15.16 times more volatile than Regional Management Corp. It trades about 0.16 of its potential returns per unit of risk. Regional Management Corp is currently generating about 0.02 per unit of risk. If you would invest  0.01  in New Amer Energy on September 3, 2024 and sell it today you would earn a total of  0.00  from holding New Amer Energy or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	30.71%
Values	Daily Returns

New Amer Energy  vs.  Regional Management Corp

New Amer Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Amer Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, New Amer is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Regional Management Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Regional Management Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Regional Management is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with New Amer and Regional Management

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

The idea behind New Amer Energy and Regional Management Corp 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.