Correlation Between B Riley and Newtek Business

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

By analyzing existing cross correlation between B Riley Financial and Newtek Business Services, you can compare the effects of market volatilities on B Riley and Newtek Business 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 B Riley with a short position of Newtek Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of B Riley and Newtek Business.

Diversification Opportunities for B Riley and Newtek Business

0.38

Correlation Coefficient

B Riley  Newtek Business

Weak diversification

The 3 months correlation between RILYO and Newtek is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding B Riley Financial and Newtek Business Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newtek Business Services and B Riley 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 B Riley Financial are associated (or correlated) with Newtek Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newtek Business Services has no effect on the direction of B Riley i.e., B Riley and Newtek Business go up and down completely randomly.

Pair Corralation between B Riley and Newtek Business

If you would invest  2,446  in Newtek Business Services on October 22, 2024 and sell it today you would earn a total of  26.00  from holding Newtek Business Services or generate 1.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	2.5%
Values	Daily Returns

B Riley Financial  vs.  Newtek Business Services

B Riley Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days B Riley Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, B Riley is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Newtek Business Services

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Newtek Business Services are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Newtek Business is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with B Riley and Newtek Business

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

The idea behind B Riley Financial and Newtek Business Services 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.