Correlation Between Ruentex Engineering and New Asia

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

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

Diversification Opportunities for Ruentex Engineering and New Asia

0.55

Correlation Coefficient

Ruentex Engineering  New Asia

Very weak diversification

The 3 months correlation between Ruentex and New is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Ruentex Engineering Constructi and New Asia Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Asia Construction and Ruentex Engineering 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 Ruentex Engineering Construction are associated (or correlated) with New Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Asia Construction has no effect on the direction of Ruentex Engineering i.e., Ruentex Engineering and New Asia go up and down completely randomly.

Pair Corralation between Ruentex Engineering and New Asia

Assuming the 90 days trading horizon Ruentex Engineering is expected to generate 2.23 times less return on investment than New Asia. But when comparing it to its historical volatility, Ruentex Engineering Construction is 1.27 times less risky than New Asia. It trades about 0.09 of its potential returns per unit of risk. New Asia Construction is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,185  in New Asia Construction on October 7, 2024 and sell it today you would earn a total of  235.00  from holding New Asia Construction or generate 19.83% return on investment over 90 days.

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

Ruentex Engineering Constructi  vs.  New Asia Construction

Ruentex Engineering

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ruentex Engineering Construction are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Ruentex Engineering may actually be approaching a critical reversion point that can send shares even higher in February 2025.

New Asia Construction

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in New Asia Construction are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, New Asia showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ruentex Engineering and New Asia

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

The idea behind Ruentex Engineering Construction and New Asia Construction 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.