Correlation Between OCC Public and Newcity Public

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

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

Diversification Opportunities for OCC Public and Newcity Public

-0.03

Correlation Coefficient

OCC Public  Newcity Public

Good diversification

The 3 months correlation between OCC and Newcity is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding OCC Public and Newcity Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newcity Public and OCC Public 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 OCC Public are associated (or correlated) with Newcity Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newcity Public has no effect on the direction of OCC Public i.e., OCC Public and Newcity Public go up and down completely randomly.

Pair Corralation between OCC Public and Newcity Public

Assuming the 90 days trading horizon OCC Public is expected to generate 82.0 times less return on investment than Newcity Public. But when comparing it to its historical volatility, OCC Public is 2.18 times less risky than Newcity Public. It trades about 0.0 of its potential returns per unit of risk. Newcity Public is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  234.00  in Newcity Public on December 28, 2024 and sell it today you would earn a total of  2.00  from holding Newcity Public or generate 0.85% return on investment over 90 days.

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

OCC Public  vs.  Newcity Public

OCC Public

Risk-Adjusted Performance

Weak

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

Newcity Public

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Newcity Public are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, Newcity Public is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with OCC Public and Newcity Public

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

The idea behind OCC Public and Newcity Public 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.