Correlation Between Impax Environmental and Ricoh

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

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

Diversification Opportunities for Impax Environmental and Ricoh

-0.08

Correlation Coefficient

Impax Environmental  Ricoh

Good diversification

The 3 months correlation between Impax and Ricoh is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Impax Environmental Markets and Ricoh Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ricoh and Impax Environmental 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 Impax Environmental Markets are associated (or correlated) with Ricoh. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ricoh has no effect on the direction of Impax Environmental i.e., Impax Environmental and Ricoh go up and down completely randomly.

Pair Corralation between Impax Environmental and Ricoh

Assuming the 90 days trading horizon Impax Environmental is expected to generate 106.42 times less return on investment than Ricoh. But when comparing it to its historical volatility, Impax Environmental Markets is 2.12 times less risky than Ricoh. It trades about 0.0 of its potential returns per unit of risk. Ricoh Co is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  148,900  in Ricoh Co on September 14, 2024 and sell it today you would earn a total of  27,050  from holding Ricoh Co or generate 18.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Impax Environmental Markets  vs.  Ricoh Co

Impax Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Impax Environmental Markets has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Impax Environmental is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Ricoh

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ricoh Co are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Ricoh unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Impax Environmental and Ricoh

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

The idea behind Impax Environmental Markets 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.