Correlation Between Ruentex Development and New Palace

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

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

Diversification Opportunities for Ruentex Development and New Palace

-0.21

Correlation Coefficient

Ruentex Development  New Palace

Very good diversification

The 3 months correlation between Ruentex and New is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Ruentex Development Co and New Palace International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Palace International and Ruentex Development 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 Development Co are associated (or correlated) with New Palace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Palace International has no effect on the direction of Ruentex Development i.e., Ruentex Development and New Palace go up and down completely randomly.

Pair Corralation between Ruentex Development and New Palace

Assuming the 90 days trading horizon Ruentex Development Co is expected to generate 1.09 times more return on investment than New Palace. However, Ruentex Development is 1.09 times more volatile than New Palace International. It trades about -0.08 of its potential returns per unit of risk. New Palace International is currently generating about -0.09 per unit of risk. If you would invest  4,325  in Ruentex Development Co on October 25, 2024 and sell it today you would lose (95.00) from holding Ruentex Development Co or give up 2.2% of portfolio value over 90 days.

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

Ruentex Development Co  vs.  New Palace International

Ruentex Development

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ruentex Development Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

New Palace International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Palace International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, New Palace 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 Ruentex Development and New Palace

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

The idea behind Ruentex Development Co and New Palace International 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.