Correlation Between Riverview Rubber and Senheng New

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

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

Diversification Opportunities for Riverview Rubber and Senheng New

0.14

Correlation Coefficient

Riverview Rubber  Senheng New

Average diversification

The 3 months correlation between Riverview and Senheng is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Riverview Rubber Estates and Senheng New Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Senheng New Retail and Riverview Rubber 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 Riverview Rubber Estates are associated (or correlated) with Senheng New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Senheng New Retail has no effect on the direction of Riverview Rubber i.e., Riverview Rubber and Senheng New go up and down completely randomly.

Pair Corralation between Riverview Rubber and Senheng New

Assuming the 90 days trading horizon Riverview Rubber Estates is expected to generate 0.88 times more return on investment than Senheng New. However, Riverview Rubber Estates is 1.13 times less risky than Senheng New. It trades about -0.02 of its potential returns per unit of risk. Senheng New Retail is currently generating about -0.03 per unit of risk. If you would invest  305.00  in Riverview Rubber Estates on December 1, 2024 and sell it today you would lose (15.00) from holding Riverview Rubber Estates or give up 4.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	85.0%
Values	Daily Returns

Riverview Rubber Estates  vs.  Senheng New Retail

Riverview Rubber Estates

Risk-Adjusted Performance

Very Weak

Over the last 90 days Riverview Rubber Estates has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Riverview Rubber is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Senheng New Retail

Risk-Adjusted Performance

Very Weak

Over the last 90 days Senheng New Retail has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Senheng New is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Riverview Rubber and Senheng New

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

The idea behind Riverview Rubber Estates and Senheng New Retail 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.