Correlation Between NewtekOne, 850 and Merrill Lynch

Can any of the company-specific risk be diversified away by investing in both NewtekOne, 850 and Merrill Lynch 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 NewtekOne, 850 and Merrill Lynch into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NewtekOne, 850 percent and Merrill Lynch Depositor, you can compare the effects of market volatilities on NewtekOne, 850 and Merrill Lynch 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 NewtekOne, 850 with a short position of Merrill Lynch. Check out your portfolio center. Please also check ongoing floating volatility patterns of NewtekOne, 850 and Merrill Lynch.

Diversification Opportunities for NewtekOne, 850 and Merrill Lynch

-0.56

Correlation Coefficient

NewtekOne, 850  Merrill Lynch

Excellent diversification

The 3 months correlation between NewtekOne, and Merrill is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding NewtekOne, 850 percent and Merrill Lynch Depositor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merrill Lynch Depositor and NewtekOne, 850 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 NewtekOne, 850 percent are associated (or correlated) with Merrill Lynch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merrill Lynch Depositor has no effect on the direction of NewtekOne, 850 i.e., NewtekOne, 850 and Merrill Lynch go up and down completely randomly.

Pair Corralation between NewtekOne, 850 and Merrill Lynch

Assuming the 90 days horizon NewtekOne, 850 percent is expected to under-perform the Merrill Lynch. But the stock apears to be less risky and, when comparing its historical volatility, NewtekOne, 850 percent is 2.32 times less risky than Merrill Lynch. The stock trades about -0.06 of its potential returns per unit of risk. The Merrill Lynch Depositor is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,616  in Merrill Lynch Depositor on September 19, 2024 and sell it today you would earn a total of  14.00  from holding Merrill Lynch Depositor or generate 0.54% return on investment over 90 days.

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

NewtekOne, 850 percent  vs.  Merrill Lynch Depositor

NewtekOne, 850 percent

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NewtekOne, 850 percent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, NewtekOne, 850 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Merrill Lynch Depositor

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with NewtekOne, 850 and Merrill Lynch

The main advantage of trading using opposite NewtekOne, 850 and Merrill Lynch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NewtekOne, 850 position performs unexpectedly, Merrill Lynch 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 Merrill Lynch will offset losses from the drop in Merrill Lynch's long position.

The idea behind NewtekOne, 850 percent and Merrill Lynch Depositor 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.