Correlation Between Ritchie Bros and Dream Residential

Can any of the company-specific risk be diversified away by investing in both Ritchie Bros and Dream Residential 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 Dream Residential 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 Dream Residential Real, you can compare the effects of market volatilities on Ritchie Bros and Dream Residential 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 Dream Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ritchie Bros and Dream Residential.

Diversification Opportunities for Ritchie Bros and Dream Residential

0.83

Correlation Coefficient

Ritchie Bros  Dream Residential

Very poor diversification

The 3 months correlation between Ritchie and Dream is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Ritchie Bros Auctioneers and Dream Residential Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dream Residential Real 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 Dream Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dream Residential Real has no effect on the direction of Ritchie Bros i.e., Ritchie Bros and Dream Residential go up and down completely randomly.

Pair Corralation between Ritchie Bros and Dream Residential

Assuming the 90 days trading horizon Ritchie Bros is expected to generate 2.06 times less return on investment than Dream Residential. But when comparing it to its historical volatility, Ritchie Bros Auctioneers is 1.94 times less risky than Dream Residential. It trades about 0.1 of its potential returns per unit of risk. Dream Residential Real is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  680.00  in Dream Residential Real on December 3, 2024 and sell it today you would earn a total of  122.00  from holding Dream Residential Real or generate 17.94% return on investment over 90 days.

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

Ritchie Bros Auctioneers  vs.  Dream Residential Real

Ritchie Bros Auctioneers

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ritchie Bros Auctioneers are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Ritchie Bros may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Dream Residential Real

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dream Residential Real are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Dream Residential unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ritchie Bros and Dream Residential

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

The idea behind Ritchie Bros Auctioneers and Dream Residential Real 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.