Correlation Between Link Reservations and RIV Capital

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

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

Diversification Opportunities for Link Reservations and RIV Capital

0.69

Correlation Coefficient

Link Reservations  RIV Capital

Poor diversification

The 3 months correlation between Link and RIV is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Link Reservations and RIV Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RIV Capital and Link Reservations 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 Link Reservations are associated (or correlated) with RIV Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RIV Capital has no effect on the direction of Link Reservations i.e., Link Reservations and RIV Capital go up and down completely randomly.

Pair Corralation between Link Reservations and RIV Capital

Given the investment horizon of 90 days Link Reservations is expected to generate 2.81 times more return on investment than RIV Capital. However, Link Reservations is 2.81 times more volatile than RIV Capital. It trades about 0.04 of its potential returns per unit of risk. RIV Capital is currently generating about -0.03 per unit of risk. If you would invest  0.20  in Link Reservations on September 4, 2024 and sell it today you would lose (0.10) from holding Link Reservations or give up 50.0% of portfolio value over 90 days.

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

Link Reservations  vs.  RIV Capital

Link Reservations

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Link Reservations are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Link Reservations showed solid returns over the last few months and may actually be approaching a breakup point.

RIV Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RIV Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Link Reservations and RIV Capital

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

The idea behind Link Reservations and RIV Capital 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.