Correlation Between Newmont and UPDATE SOFTWARE

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

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

Diversification Opportunities for Newmont and UPDATE SOFTWARE

-0.17

Correlation Coefficient

Newmont  UPDATE SOFTWARE

Good diversification

The 3 months correlation between Newmont and UPDATE is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Newmont and UPDATE SOFTWARE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UPDATE SOFTWARE and Newmont 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 Newmont are associated (or correlated) with UPDATE SOFTWARE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UPDATE SOFTWARE has no effect on the direction of Newmont i.e., Newmont and UPDATE SOFTWARE go up and down completely randomly.

Pair Corralation between Newmont and UPDATE SOFTWARE

Assuming the 90 days trading horizon Newmont is expected to generate 0.62 times more return on investment than UPDATE SOFTWARE. However, Newmont is 1.61 times less risky than UPDATE SOFTWARE. It trades about 0.17 of its potential returns per unit of risk. UPDATE SOFTWARE is currently generating about -0.12 per unit of risk. If you would invest  3,641  in Newmont on December 21, 2024 and sell it today you would earn a total of  757.00  from holding Newmont or generate 20.79% return on investment over 90 days.

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

Newmont  vs.  UPDATE SOFTWARE

Newmont

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Newmont are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Newmont unveiled solid returns over the last few months and may actually be approaching a breakup point.

UPDATE SOFTWARE

Risk-Adjusted Performance

Very Weak

Over the last 90 days UPDATE SOFTWARE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Newmont and UPDATE SOFTWARE

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

The idea behind Newmont and UPDATE SOFTWARE 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.