Correlation Between Information Services and Ritchie Bros

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

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

Diversification Opportunities for Information Services and Ritchie Bros

-0.66

Correlation Coefficient

Information Services  Ritchie Bros

Excellent diversification

The 3 months correlation between Information and Ritchie is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Information Services and Ritchie Bros Auctioneers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ritchie Bros Auctioneers and Information Services 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 Information Services are associated (or correlated) with Ritchie Bros. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ritchie Bros Auctioneers has no effect on the direction of Information Services i.e., Information Services and Ritchie Bros go up and down completely randomly.

Pair Corralation between Information Services and Ritchie Bros

Assuming the 90 days trading horizon Information Services is expected to under-perform the Ritchie Bros. In addition to that, Information Services is 1.1 times more volatile than Ritchie Bros Auctioneers. It trades about -0.15 of its total potential returns per unit of risk. Ritchie Bros Auctioneers is currently generating about -0.1 per unit of volatility. If you would invest  13,290  in Ritchie Bros Auctioneers on September 22, 2024 and sell it today you would lose (284.00) from holding Ritchie Bros Auctioneers or give up 2.14% of portfolio value over 90 days.

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

Information Services  vs.  Ritchie Bros Auctioneers

Information Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Information Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Ritchie Bros Auctioneers

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ritchie Bros Auctioneers are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Ritchie Bros displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Information Services and Ritchie Bros

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

The idea behind Information Services and Ritchie Bros Auctioneers 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.