Correlation Between ChemoMetec and RTX AS

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

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

Diversification Opportunities for ChemoMetec and RTX AS

-0.63

Correlation Coefficient

ChemoMetec  RTX AS

Excellent diversification

The 3 months correlation between ChemoMetec and RTX is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding ChemoMetec AS and RTX AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RTX AS and ChemoMetec 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 ChemoMetec AS are associated (or correlated) with RTX AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RTX AS has no effect on the direction of ChemoMetec i.e., ChemoMetec and RTX AS go up and down completely randomly.

Pair Corralation between ChemoMetec and RTX AS

Assuming the 90 days trading horizon ChemoMetec AS is expected to generate 2.62 times more return on investment than RTX AS. However, ChemoMetec is 2.62 times more volatile than RTX AS. It trades about 0.11 of its potential returns per unit of risk. RTX AS is currently generating about -0.25 per unit of risk. If you would invest  37,560  in ChemoMetec AS on September 5, 2024 and sell it today you would earn a total of  11,200  from holding ChemoMetec AS or generate 29.82% return on investment over 90 days.

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

ChemoMetec AS  vs.  RTX AS

ChemoMetec AS

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ChemoMetec AS are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, ChemoMetec exhibited solid returns over the last few months and may actually be approaching a breakup point.

RTX AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RTX AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with ChemoMetec and RTX AS

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

The idea behind ChemoMetec AS and RTX AS 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.