Correlation Between Data Storage and Ree Automotive

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

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

Diversification Opportunities for Data Storage and Ree Automotive

0.43

Correlation Coefficient

Data Storage  Ree Automotive

Very weak diversification

The 3 months correlation between Data and Ree is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Data Storage and Ree Automotive Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ree Automotive Holding and Data Storage 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 Data Storage are associated (or correlated) with Ree Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ree Automotive Holding has no effect on the direction of Data Storage i.e., Data Storage and Ree Automotive go up and down completely randomly.

Pair Corralation between Data Storage and Ree Automotive

Assuming the 90 days horizon Data Storage is expected to generate 1.7 times more return on investment than Ree Automotive. However, Data Storage is 1.7 times more volatile than Ree Automotive Holding. It trades about 0.19 of its potential returns per unit of risk. Ree Automotive Holding is currently generating about 0.27 per unit of risk. If you would invest  48.00  in Data Storage on September 20, 2024 and sell it today you would earn a total of  19.00  from holding Data Storage or generate 39.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Data Storage  vs.  Ree Automotive Holding

Data Storage

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Data Storage are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Data Storage showed solid returns over the last few months and may actually be approaching a breakup point.

Ree Automotive Holding

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ree Automotive Holding are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent technical and fundamental indicators, Ree Automotive exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Data Storage and Ree Automotive

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

The idea behind Data Storage and Ree Automotive Holding 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.