Correlation Between Newlake Capital and AFC Gamma

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

By analyzing existing cross correlation between Newlake Capital Partners and AFC Gamma, you can compare the effects of market volatilities on Newlake Capital and AFC Gamma 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 Newlake Capital with a short position of AFC Gamma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Newlake Capital and AFC Gamma.

Diversification Opportunities for Newlake Capital and AFC Gamma

0.61

Correlation Coefficient

Newlake Capital  AFC Gamma

Poor diversification

The 3 months correlation between Newlake and AFC is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Newlake Capital Partners and AFC Gamma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AFC Gamma and Newlake Capital 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 Newlake Capital Partners are associated (or correlated) with AFC Gamma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AFC Gamma has no effect on the direction of Newlake Capital i.e., Newlake Capital and AFC Gamma go up and down completely randomly.

Pair Corralation between Newlake Capital and AFC Gamma

Given the investment horizon of 90 days Newlake Capital Partners is expected to generate 0.38 times more return on investment than AFC Gamma. However, Newlake Capital Partners is 2.65 times less risky than AFC Gamma. It trades about -0.19 of its potential returns per unit of risk. AFC Gamma is currently generating about -0.12 per unit of risk. If you would invest  1,748  in Newlake Capital Partners on December 28, 2024 and sell it today you would lose (240.00) from holding Newlake Capital Partners or give up 13.73% of portfolio value over 90 days.

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

Newlake Capital Partners  vs.  AFC Gamma

Newlake Capital Partners

Risk-Adjusted Performance

Very Weak

Over the last 90 days Newlake Capital Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

AFC Gamma

Risk-Adjusted Performance

Very Weak

Over the last 90 days AFC Gamma has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Newlake Capital and AFC Gamma

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

The idea behind Newlake Capital Partners and AFC Gamma 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.