Correlation Between Reworld Media and Arkema SA

Can any of the company-specific risk be diversified away by investing in both Reworld Media and Arkema SA 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 Reworld Media and Arkema SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Reworld Media and Arkema SA, you can compare the effects of market volatilities on Reworld Media and Arkema SA 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 Reworld Media with a short position of Arkema SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reworld Media and Arkema SA.

Diversification Opportunities for Reworld Media and Arkema SA

-0.65

Correlation Coefficient

Reworld Media  Arkema SA

Excellent diversification

The 3 months correlation between Reworld and Arkema is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Reworld Media and Arkema SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arkema SA and Reworld Media 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 Reworld Media are associated (or correlated) with Arkema SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arkema SA has no effect on the direction of Reworld Media i.e., Reworld Media and Arkema SA go up and down completely randomly.

Pair Corralation between Reworld Media and Arkema SA

Assuming the 90 days trading horizon Reworld Media is expected to under-perform the Arkema SA. In addition to that, Reworld Media is 1.48 times more volatile than Arkema SA. It trades about -0.02 of its total potential returns per unit of risk. Arkema SA is currently generating about 0.01 per unit of volatility. If you would invest  7,210  in Arkema SA on December 30, 2024 and sell it today you would lose (30.00) from holding Arkema SA or give up 0.42% of portfolio value over 90 days.

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

Reworld Media  vs.  Arkema SA

Reworld Media

Risk-Adjusted Performance

Very Weak

Over the last 90 days Reworld Media has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Reworld Media is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Arkema SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arkema SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Arkema SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Reworld Media and Arkema SA

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

The idea behind Reworld Media and Arkema SA 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.