Correlation Between New Wave and Cordia

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

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

Diversification Opportunities for New Wave and Cordia

-0.01

Correlation Coefficient

New Wave  Cordia

Good diversification

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

Pair Corralation between New Wave and Cordia

Assuming the 90 days horizon New Wave Holdings is expected to generate 1.13 times more return on investment than Cordia. However, New Wave is 1.13 times more volatile than Cordia. It trades about 0.07 of its potential returns per unit of risk. Cordia is currently generating about 0.04 per unit of risk. If you would invest  1.50  in New Wave Holdings on October 11, 2024 and sell it today you would lose (0.40) from holding New Wave Holdings or give up 26.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

New Wave Holdings  vs.  Cordia

New Wave Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in New Wave Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, New Wave reported solid returns over the last few months and may actually be approaching a breakup point.

Cordia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cordia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with New Wave and Cordia

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

The idea behind New Wave Holdings and Cordia 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.

Check out your portfolio center.

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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.