Correlation Between Baker Steel and Ricoh Co

Can any of the company-specific risk be diversified away by investing in both Baker Steel and Ricoh Co 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 Baker Steel and Ricoh Co into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Baker Steel and Ricoh Co

0.74

Correlation Coefficient

Baker Steel  Ricoh Co

Poor diversification

The 3 months correlation between Baker and Ricoh is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Baker Steel Resources and Ricoh Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ricoh Co and Baker Steel 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 Baker Steel Resources are associated (or correlated) with Ricoh Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ricoh Co has no effect on the direction of Baker Steel i.e., Baker Steel and Ricoh Co go up and down completely randomly.

Pair Corralation between Baker Steel and Ricoh Co

Assuming the 90 days trading horizon Baker Steel Resources is expected to generate 0.99 times more return on investment than Ricoh Co. However, Baker Steel Resources is 1.01 times less risky than Ricoh Co. It trades about -0.02 of its potential returns per unit of risk. Ricoh Co is currently generating about -0.08 per unit of risk. If you would invest  5,400  in Baker Steel Resources on December 30, 2024 and sell it today you would lose (200.00) from holding Baker Steel Resources or give up 3.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Baker Steel Resources  vs.  Ricoh Co

Baker Steel Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Baker Steel Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Baker Steel is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Ricoh Co

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ricoh Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Baker Steel and Ricoh Co

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

The idea behind Baker Steel Resources and Ricoh 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.