Correlation Between NewWave Platinum and NewWave Silver

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

By analyzing existing cross correlation between NewWave Platinum Exchange and NewWave Silver Exchange, you can compare the effects of market volatilities on NewWave Platinum and NewWave Silver 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 NewWave Platinum with a short position of NewWave Silver. Check out your portfolio center. Please also check ongoing floating volatility patterns of NewWave Platinum and NewWave Silver.

Diversification Opportunities for NewWave Platinum and NewWave Silver

0.54

Correlation Coefficient

NewWave Platinum  NewWave Silver

Very weak diversification

The 3 months correlation between NewWave and NewWave is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding NewWave Platinum Exchange and NewWave Silver Exchange in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NewWave Silver Exchange and NewWave Platinum 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 NewWave Platinum Exchange are associated (or correlated) with NewWave Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NewWave Silver Exchange has no effect on the direction of NewWave Platinum i.e., NewWave Platinum and NewWave Silver go up and down completely randomly.

Pair Corralation between NewWave Platinum and NewWave Silver

Assuming the 90 days trading horizon NewWave Platinum is expected to generate 1.93 times less return on investment than NewWave Silver. But when comparing it to its historical volatility, NewWave Platinum Exchange is 1.04 times less risky than NewWave Silver. It trades about 0.05 of its potential returns per unit of risk. NewWave Silver Exchange is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  52,500  in NewWave Silver Exchange on October 27, 2024 and sell it today you would earn a total of  1,200  from holding NewWave Silver Exchange or generate 2.29% return on investment over 90 days.

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

NewWave Platinum Exchange  vs.  NewWave Silver Exchange

NewWave Platinum Exchange

Risk-Adjusted Performance

0 of 100

Very Weak

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

NewWave Silver Exchange

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with NewWave Platinum and NewWave Silver

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

The idea behind NewWave Platinum Exchange and NewWave Silver Exchange 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 Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..