Correlation Between Newmark and Vonovia SE

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

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

Diversification Opportunities for Newmark and Vonovia SE

0.64

Correlation Coefficient

Newmark  Vonovia SE

Poor diversification

The 3 months correlation between Newmark and Vonovia is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Newmark Group and Vonovia SE ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vonovia SE ADR 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 Vonovia SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vonovia SE ADR has no effect on the direction of Newmark i.e., Newmark and Vonovia SE go up and down completely randomly.

Pair Corralation between Newmark and Vonovia SE

Given the investment horizon of 90 days Newmark Group is expected to generate 1.26 times more return on investment than Vonovia SE. However, Newmark is 1.26 times more volatile than Vonovia SE ADR. It trades about -0.02 of its potential returns per unit of risk. Vonovia SE ADR is currently generating about -0.09 per unit of risk. If you would invest  1,276  in Newmark Group on December 29, 2024 and sell it today you would lose (65.00) from holding Newmark Group or give up 5.09% of portfolio value over 90 days.

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

Newmark Group  vs.  Vonovia SE ADR

Newmark Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Newmark Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Newmark is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Vonovia SE ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vonovia SE ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Newmark and Vonovia SE

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

The idea behind Newmark Group and Vonovia SE ADR 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.