Correlation Between Ritchie Bros and Bird Construction

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

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

Diversification Opportunities for Ritchie Bros and Bird Construction

-0.01

Correlation Coefficient

Ritchie Bros  Bird Construction

Good diversification

The 3 months correlation between Ritchie and Bird is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Ritchie Bros Auctioneers and Bird Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bird Construction and Ritchie Bros 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 Ritchie Bros Auctioneers are associated (or correlated) with Bird Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bird Construction has no effect on the direction of Ritchie Bros i.e., Ritchie Bros and Bird Construction go up and down completely randomly.

Pair Corralation between Ritchie Bros and Bird Construction

Assuming the 90 days trading horizon Ritchie Bros is expected to generate 1.43 times less return on investment than Bird Construction. But when comparing it to its historical volatility, Ritchie Bros Auctioneers is 1.61 times less risky than Bird Construction. It trades about 0.11 of its potential returns per unit of risk. Bird Construction is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,379  in Bird Construction on October 9, 2024 and sell it today you would earn a total of  1,015  from holding Bird Construction or generate 73.6% return on investment over 90 days.

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

Ritchie Bros Auctioneers  vs.  Bird Construction

Ritchie Bros Auctioneers

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ritchie Bros Auctioneers are ranked lower than 14 (%) 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.

Bird Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bird Construction has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Ritchie Bros and Bird Construction

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

The idea behind Ritchie Bros Auctioneers and Bird Construction 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.