Correlation Between Newmark and DigitalBridge

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

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

Diversification Opportunities for Newmark and DigitalBridge

0.55

Correlation Coefficient

Newmark  DigitalBridge

Very weak diversification

The 3 months correlation between Newmark and DigitalBridge is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Newmark Group and DigitalBridge Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DigitalBridge Group and Newmark 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 Newmark Group are associated (or correlated) with DigitalBridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DigitalBridge Group has no effect on the direction of Newmark i.e., Newmark and DigitalBridge go up and down completely randomly.

Pair Corralation between Newmark and DigitalBridge

Given the investment horizon of 90 days Newmark Group is expected to generate 1.99 times more return on investment than DigitalBridge. However, Newmark is 1.99 times more volatile than DigitalBridge Group. It trades about 0.12 of its potential returns per unit of risk. DigitalBridge Group is currently generating about 0.08 per unit of risk. If you would invest  1,376  in Newmark Group on August 31, 2024 and sell it today you would earn a total of  187.00  from holding Newmark Group or generate 13.59% return on investment over 90 days.

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

Newmark Group  vs.  DigitalBridge Group

Newmark Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Newmark Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Newmark disclosed solid returns over the last few months and may actually be approaching a breakup point.

DigitalBridge Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DigitalBridge Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, DigitalBridge is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Newmark and DigitalBridge

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

The idea behind Newmark Group and DigitalBridge Group 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.