Correlation Between Rayonier and Newlake Capital

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

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

Diversification Opportunities for Rayonier and Newlake Capital

0.86

Correlation Coefficient

Rayonier  Newlake Capital

Very poor diversification

The 3 months correlation between Rayonier and Newlake is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Rayonier and Newlake Capital Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newlake Capital Partners and Rayonier 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 Rayonier are associated (or correlated) with Newlake Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newlake Capital Partners has no effect on the direction of Rayonier i.e., Rayonier and Newlake Capital go up and down completely randomly.

Pair Corralation between Rayonier and Newlake Capital

Considering the 90-day investment horizon Rayonier is expected to generate 0.94 times more return on investment than Newlake Capital. However, Rayonier is 1.06 times less risky than Newlake Capital. It trades about -0.15 of its potential returns per unit of risk. Newlake Capital Partners is currently generating about -0.19 per unit of risk. If you would invest  2,967  in Rayonier on November 27, 2024 and sell it today you would lose (336.00) from holding Rayonier or give up 11.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.31%
Values	Daily Returns

Rayonier  vs.  Newlake Capital Partners

Rayonier

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rayonier has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Newlake Capital Partners

Risk-Adjusted Performance

Very Weak

Over the last 90 days Newlake Capital Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in March 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Rayonier and Newlake Capital

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

The idea behind Rayonier and Newlake Capital Partners 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.