Correlation Between Rubberex M and Riverview Rubber

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

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

Diversification Opportunities for Rubberex M and Riverview Rubber

0.09

Correlation Coefficient

Rubberex M  Riverview Rubber

Significant diversification

The 3 months correlation between Rubberex and Riverview is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Rubberex M and Riverview Rubber Estates in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Riverview Rubber Estates and Rubberex M 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 Rubberex M are associated (or correlated) with Riverview Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Riverview Rubber Estates has no effect on the direction of Rubberex M i.e., Rubberex M and Riverview Rubber go up and down completely randomly.

Pair Corralation between Rubberex M and Riverview Rubber

Assuming the 90 days trading horizon Rubberex M is expected to generate 1.71 times more return on investment than Riverview Rubber. However, Rubberex M is 1.71 times more volatile than Riverview Rubber Estates. It trades about 0.02 of its potential returns per unit of risk. Riverview Rubber Estates is currently generating about -0.08 per unit of risk. If you would invest  19.00  in Rubberex M on September 12, 2024 and sell it today you would earn a total of  0.00  from holding Rubberex M or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Rubberex M  vs.  Riverview Rubber Estates

Rubberex M

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rubberex M are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Rubberex M is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Riverview Rubber Estates

Risk-Adjusted Performance

0 of 100

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.

Pair Trading with Rubberex M and Riverview Rubber

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

The idea behind Rubberex M and Riverview Rubber Estates 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.