Correlation Between RLX TECH and Veeva Systems

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

By analyzing existing cross correlation between RLX TECH SPADR1 and Veeva Systems, you can compare the effects of market volatilities on RLX TECH and Veeva Systems 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 RLX TECH with a short position of Veeva Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of RLX TECH and Veeva Systems.

Diversification Opportunities for RLX TECH and Veeva Systems

0.53

Correlation Coefficient

RLX TECH  Veeva Systems

Very weak diversification

The 3 months correlation between RLX and Veeva is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding RLX TECH SPADR1 and Veeva Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veeva Systems and RLX TECH 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 RLX TECH SPADR1 are associated (or correlated) with Veeva Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Veeva Systems has no effect on the direction of RLX TECH i.e., RLX TECH and Veeva Systems go up and down completely randomly.

Pair Corralation between RLX TECH and Veeva Systems

Assuming the 90 days horizon RLX TECH SPADR1 is expected to generate 0.98 times more return on investment than Veeva Systems. However, RLX TECH SPADR1 is 1.02 times less risky than Veeva Systems. It trades about 0.16 of its potential returns per unit of risk. Veeva Systems is currently generating about 0.04 per unit of risk. If you would invest  171.00  in RLX TECH SPADR1 on September 24, 2024 and sell it today you would earn a total of  14.00  from holding RLX TECH SPADR1 or generate 8.19% return on investment over 90 days.

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

RLX TECH SPADR1  vs.  Veeva Systems

RLX TECH SPADR1

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RLX TECH SPADR1 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, RLX TECH reported solid returns over the last few months and may actually be approaching a breakup point.

Veeva Systems

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Veeva Systems are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Veeva Systems may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with RLX TECH and Veeva Systems

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

The idea behind RLX TECH SPADR1 and Veeva Systems 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.