Correlation Between Mekonomen and RVRC Holding

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

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

Diversification Opportunities for Mekonomen and RVRC Holding

-0.23

Correlation Coefficient

Mekonomen  RVRC Holding

Very good diversification

The 3 months correlation between Mekonomen and RVRC is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Mekonomen AB and RVRC Holding AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RVRC Holding AB and Mekonomen 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 Mekonomen AB are associated (or correlated) with RVRC Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RVRC Holding AB has no effect on the direction of Mekonomen i.e., Mekonomen and RVRC Holding go up and down completely randomly.

Pair Corralation between Mekonomen and RVRC Holding

Assuming the 90 days trading horizon Mekonomen AB is expected to under-perform the RVRC Holding. But the stock apears to be less risky and, when comparing its historical volatility, Mekonomen AB is 1.42 times less risky than RVRC Holding. The stock trades about -0.11 of its potential returns per unit of risk. The RVRC Holding AB is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  4,142  in RVRC Holding AB on December 24, 2024 and sell it today you would earn a total of  458.00  from holding RVRC Holding AB or generate 11.06% return on investment over 90 days.

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

Mekonomen AB  vs.  RVRC Holding AB

Mekonomen AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mekonomen AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

RVRC Holding AB

Risk-Adjusted Performance

OK

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

Pair Trading with Mekonomen and RVRC Holding

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

The idea behind Mekonomen AB and RVRC Holding AB 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.