Correlation Between New England and New York

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

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

Diversification Opportunities for New England and New York

-0.06

Correlation Coefficient

New England  New York

Good diversification

The 3 months correlation between New and New is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding New England Realty and New York City in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New York City and New England 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 England Realty are associated (or correlated) with New York. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New York City has no effect on the direction of New England i.e., New England and New York go up and down completely randomly.

Pair Corralation between New England and New York

Considering the 90-day investment horizon New England is expected to generate 2.48 times less return on investment than New York. But when comparing it to its historical volatility, New England Realty is 1.37 times less risky than New York. It trades about 0.07 of its potential returns per unit of risk. New York City is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  870.00  in New York City on December 25, 2024 and sell it today you would earn a total of  203.00  from holding New York City or generate 23.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	66.67%
Values	Daily Returns

New England Realty  vs.  New York City

New England Realty

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in New England Realty are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain technical and fundamental indicators, New England may actually be approaching a critical reversion point that can send shares even higher in April 2025.

New York City

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in New York City are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, New York exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with New England and New York

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

The idea behind New England Realty and New York City 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.