Correlation Between New Era and Timken

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

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

Diversification Opportunities for New Era and Timken

0.32

Correlation Coefficient

New Era  Timken

Weak diversification

The 3 months correlation between New and Timken is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding New Era Helium and Timken Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Timken Company and New Era 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 Era Helium are associated (or correlated) with Timken. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Timken Company has no effect on the direction of New Era i.e., New Era and Timken go up and down completely randomly.

Pair Corralation between New Era and Timken

Given the investment horizon of 90 days New Era Helium is expected to under-perform the Timken. In addition to that, New Era is 2.11 times more volatile than Timken Company. It trades about -0.09 of its total potential returns per unit of risk. Timken Company is currently generating about 0.02 per unit of volatility. If you would invest  6,739  in Timken Company on September 19, 2024 and sell it today you would earn a total of  461.00  from holding Timken Company or generate 6.84% return on investment over 90 days.

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

New Era Helium  vs.  Timken Company

New Era Helium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Era Helium has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Timken Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Timken Company has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's forward-looking signals remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with New Era and Timken

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

The idea behind New Era Helium and Timken Company 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 Transaction History module to view history of all your transactions and understand their impact on performance.