Correlation Between New Residential and Aberforth Smaller

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

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

Diversification Opportunities for New Residential and Aberforth Smaller

0.83

Correlation Coefficient

New Residential  Aberforth Smaller

Very poor diversification

The 3 months correlation between New and Aberforth is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment and Aberforth Smaller Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberforth Smaller and New Residential 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 Residential Investment are associated (or correlated) with Aberforth Smaller. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberforth Smaller has no effect on the direction of New Residential i.e., New Residential and Aberforth Smaller go up and down completely randomly.

Pair Corralation between New Residential and Aberforth Smaller

Assuming the 90 days trading horizon New Residential Investment is expected to generate 1.36 times more return on investment than Aberforth Smaller. However, New Residential is 1.36 times more volatile than Aberforth Smaller Companies. It trades about 0.06 of its potential returns per unit of risk. Aberforth Smaller Companies is currently generating about 0.06 per unit of risk. If you would invest  837.00  in New Residential Investment on April 20, 2025 and sell it today you would earn a total of  356.00  from holding New Residential Investment or generate 42.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.4%
Values	Daily Returns

New Residential Investment  vs.  Aberforth Smaller Companies

New Residential Inve

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in New Residential Investment are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, New Residential unveiled solid returns over the last few months and may actually be approaching a breakup point.

Aberforth Smaller

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aberforth Smaller Companies are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Aberforth Smaller exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with New Residential and Aberforth Smaller

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

The idea behind New Residential Investment and Aberforth Smaller Companies 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.