Correlation Between Polar Capital and NewRiver REIT

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

By analyzing existing cross correlation between Polar Capital Technology and NewRiver REIT plc, you can compare the effects of market volatilities on Polar Capital and NewRiver REIT 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 Polar Capital with a short position of NewRiver REIT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Polar Capital and NewRiver REIT.

Diversification Opportunities for Polar Capital and NewRiver REIT

-0.26

Correlation Coefficient

Polar Capital  NewRiver REIT

Very good diversification

The 3 months correlation between Polar and NewRiver is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Polar Capital Technology and NewRiver REIT plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NewRiver REIT plc and Polar Capital 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 Polar Capital Technology are associated (or correlated) with NewRiver REIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NewRiver REIT plc has no effect on the direction of Polar Capital i.e., Polar Capital and NewRiver REIT go up and down completely randomly.

Pair Corralation between Polar Capital and NewRiver REIT

Assuming the 90 days trading horizon Polar Capital Technology is expected to generate 1.14 times more return on investment than NewRiver REIT. However, Polar Capital is 1.14 times more volatile than NewRiver REIT plc. It trades about 0.0 of its potential returns per unit of risk. NewRiver REIT plc is currently generating about -0.08 per unit of risk. If you would invest  33,950  in Polar Capital Technology on December 2, 2024 and sell it today you would lose (450.00) from holding Polar Capital Technology or give up 1.33% of portfolio value over 90 days.

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

Polar Capital Technology  vs.  NewRiver REIT plc

Polar Capital Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Polar Capital Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Polar Capital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

NewRiver REIT plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days NewRiver REIT plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Polar Capital and NewRiver REIT

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

The idea behind Polar Capital Technology and NewRiver REIT plc 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.