Correlation Between Rechi Precision and Globaltek Fabrication

Can any of the company-specific risk be diversified away by investing in both Rechi Precision and Globaltek Fabrication 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 Rechi Precision and Globaltek Fabrication into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Rechi Precision Co and Globaltek Fabrication Co, you can compare the effects of market volatilities on Rechi Precision and Globaltek Fabrication 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 Rechi Precision with a short position of Globaltek Fabrication. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rechi Precision and Globaltek Fabrication.

Diversification Opportunities for Rechi Precision and Globaltek Fabrication

-0.06

Correlation Coefficient

Rechi Precision  Globaltek Fabrication

Good diversification

The 3 months correlation between Rechi and Globaltek is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Rechi Precision Co and Globaltek Fabrication Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globaltek Fabrication and Rechi Precision 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 Rechi Precision Co are associated (or correlated) with Globaltek Fabrication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globaltek Fabrication has no effect on the direction of Rechi Precision i.e., Rechi Precision and Globaltek Fabrication go up and down completely randomly.

Pair Corralation between Rechi Precision and Globaltek Fabrication

Assuming the 90 days trading horizon Rechi Precision Co is expected to generate 0.51 times more return on investment than Globaltek Fabrication. However, Rechi Precision Co is 1.98 times less risky than Globaltek Fabrication. It trades about 0.22 of its potential returns per unit of risk. Globaltek Fabrication Co is currently generating about 0.02 per unit of risk. If you would invest  2,535  in Rechi Precision Co on December 23, 2024 and sell it today you would earn a total of  465.00  from holding Rechi Precision Co or generate 18.34% return on investment over 90 days.

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

Rechi Precision Co  vs.  Globaltek Fabrication Co

Rechi Precision

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Rechi Precision Co are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Rechi Precision showed solid returns over the last few months and may actually be approaching a breakup point.

Globaltek Fabrication

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Globaltek Fabrication Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Globaltek Fabrication is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Rechi Precision and Globaltek Fabrication

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

The idea behind Rechi Precision Co and Globaltek Fabrication Co 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.