Correlation Between NewWave USD and NewWave Silver

Can any of the company-specific risk be diversified away by investing in both NewWave USD 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 USD 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 USD Currency and NewWave Silver Exchange, you can compare the effects of market volatilities on NewWave USD 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 USD with a short position of NewWave Silver. Check out your portfolio center. Please also check ongoing floating volatility patterns of NewWave USD and NewWave Silver.

Diversification Opportunities for NewWave USD and NewWave Silver

-0.2

Correlation Coefficient

NewWave USD  NewWave Silver

Good diversification

The 3 months correlation between NewWave and NewWave is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding NewWave USD Currency 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 USD 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 USD Currency 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 USD i.e., NewWave USD and NewWave Silver go up and down completely randomly.

Pair Corralation between NewWave USD and NewWave Silver

Assuming the 90 days trading horizon NewWave USD Currency is expected to generate 0.58 times more return on investment than NewWave Silver. However, NewWave USD Currency is 1.72 times less risky than NewWave Silver. It trades about 0.1 of its potential returns per unit of risk. NewWave Silver Exchange is currently generating about -0.06 per unit of risk. If you would invest  178,600  in NewWave USD Currency on October 27, 2024 and sell it today you would earn a total of  8,300  from holding NewWave USD Currency or generate 4.65% return on investment over 90 days.

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

NewWave USD Currency  vs.  NewWave Silver Exchange

NewWave USD Currency

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NewWave USD Currency are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, NewWave USD 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 USD and NewWave Silver

The main advantage of trading using opposite NewWave USD and NewWave Silver positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NewWave USD 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 USD Currency 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.

Check out your portfolio center.

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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.