Correlation Between Western New and Red River

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

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

Diversification Opportunities for Western New and Red River

0.81

Correlation Coefficient

Western New  Red River

Very poor diversification

The 3 months correlation between Western and Red is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Western New England and Red River Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red River Bancshares and Western New 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 Western New England are associated (or correlated) with Red River. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red River Bancshares has no effect on the direction of Western New i.e., Western New and Red River go up and down completely randomly.

Pair Corralation between Western New and Red River

Given the investment horizon of 90 days Western New England is expected to generate 0.87 times more return on investment than Red River. However, Western New England is 1.14 times less risky than Red River. It trades about 0.03 of its potential returns per unit of risk. Red River Bancshares is currently generating about -0.07 per unit of risk. If you would invest  914.00  in Western New England on December 25, 2024 and sell it today you would earn a total of  19.00  from holding Western New England or generate 2.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Western New England  vs.  Red River Bancshares

Western New England

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Western New England are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Western New is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Red River Bancshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days Red River Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's fundamental drivers remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Western New and Red River

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

The idea behind Western New England and Red River Bancshares 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.