Correlation Between Stratus Properties and New World

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

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

Diversification Opportunities for Stratus Properties and New World

-0.01

Correlation Coefficient

Stratus Properties  New World

Good diversification

The 3 months correlation between Stratus and New is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Stratus Properties and New World Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New World Development and Stratus Properties 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 Stratus Properties are associated (or correlated) with New World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New World Development has no effect on the direction of Stratus Properties i.e., Stratus Properties and New World go up and down completely randomly.

Pair Corralation between Stratus Properties and New World

Given the investment horizon of 90 days Stratus Properties is expected to under-perform the New World. But the stock apears to be less risky and, when comparing its historical volatility, Stratus Properties is 3.86 times less risky than New World. The stock trades about -0.04 of its potential returns per unit of risk. The New World Development is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  35.00  in New World Development on December 28, 2024 and sell it today you would earn a total of  1.00  from holding New World Development or generate 2.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Stratus Properties  vs.  New World Development

Stratus Properties

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stratus Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Stratus Properties is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

New World Development

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in New World Development are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, New World showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stratus Properties and New World

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

The idea behind Stratus Properties and New World Development 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.