Correlation Between NewWave Silver and NewWave Platinum

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

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

Diversification Opportunities for NewWave Silver and NewWave Platinum

0.54

Correlation Coefficient

NewWave Silver  NewWave Platinum

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 Silver Exchange and NewWave Platinum Exchange in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NewWave Platinum Exchange and NewWave Silver 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 Silver Exchange are associated (or correlated) with NewWave Platinum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NewWave Platinum Exchange has no effect on the direction of NewWave Silver i.e., NewWave Silver and NewWave Platinum go up and down completely randomly.

Pair Corralation between NewWave Silver and NewWave Platinum

Assuming the 90 days trading horizon NewWave Silver Exchange is expected to under-perform the NewWave Platinum. In addition to that, NewWave Silver is 1.11 times more volatile than NewWave Platinum Exchange. It trades about -0.06 of its total potential returns per unit of risk. NewWave Platinum Exchange is currently generating about -0.06 per unit of volatility. If you would invest  1,747,000  in NewWave Platinum Exchange on October 27, 2024 and sell it today you would lose (81,600) from holding NewWave Platinum Exchange or give up 4.67% of portfolio value over 90 days.

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

NewWave Silver Exchange  vs.  NewWave Platinum Exchange

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.

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.

Pair Trading with NewWave Silver and NewWave Platinum

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

The idea behind NewWave Silver Exchange and NewWave Platinum 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.