Correlation Between New Providence and Gap,

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

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

Diversification Opportunities for New Providence and Gap,

0.43

Correlation Coefficient

New Providence  Gap,

Very weak diversification

The 3 months correlation between New and Gap, is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding New Providence Acquisition and The Gap, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gap, and New Providence 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 New Providence Acquisition are associated (or correlated) with Gap,. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gap, has no effect on the direction of New Providence i.e., New Providence and Gap, go up and down completely randomly.

Pair Corralation between New Providence and Gap,

Assuming the 90 days horizon New Providence is expected to generate 1.04 times less return on investment than Gap,. But when comparing it to its historical volatility, New Providence Acquisition is 1.01 times less risky than Gap,. It trades about 0.04 of its potential returns per unit of risk. The Gap, is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,038  in The Gap, on October 1, 2024 and sell it today you would earn a total of  390.00  from holding The Gap, or generate 19.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	87.1%
Values	Daily Returns

New Providence Acquisition  vs.  The Gap,

New Providence Acqui

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days New Providence Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, New Providence is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Gap,

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Gap, are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Gap, reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with New Providence and Gap,

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

The idea behind New Providence Acquisition and The Gap, 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.