Correlation Between Safe and New England

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

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

Diversification Opportunities for Safe and New England

0.12

Correlation Coefficient

Safe  New England

Average diversification

The 3 months correlation between Safe and New is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Safe and Green and New England Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New England Realty and Safe 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 Safe and Green are associated (or correlated) with New England. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New England Realty has no effect on the direction of Safe i.e., Safe and New England go up and down completely randomly.

Pair Corralation between Safe and New England

Considering the 90-day investment horizon Safe and Green is expected to under-perform the New England. In addition to that, Safe is 2.76 times more volatile than New England Realty. It trades about -0.13 of its total potential returns per unit of risk. New England Realty is currently generating about 0.07 per unit of volatility. If you would invest  7,426  in New England Realty on December 25, 2024 and sell it today you would earn a total of  410.00  from holding New England Realty or generate 5.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	66.67%
Values	Daily Returns

Safe and Green  vs.  New England Realty

Safe and Green

Risk-Adjusted Performance

Very Weak

Over the last 90 days Safe and Green has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

New England Realty

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in New England Realty are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain technical and fundamental indicators, New England may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Safe and New England

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

The idea behind Safe and Green and New England Realty 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.