Correlation Between Ritchie Bros and Information Services

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

Diversification Opportunities for Ritchie Bros and Information Services

-0.49

Correlation Coefficient

Ritchie Bros  Information Services

Very good diversification

The 3 months correlation between Ritchie and Information is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Ritchie Bros Auctioneers and Information Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Information Services 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 Information Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Information Services has no effect on the direction of Ritchie Bros i.e., Ritchie Bros and Information Services go up and down completely randomly.

Pair Corralation between Ritchie Bros and Information Services

Assuming the 90 days trading horizon Ritchie Bros Auctioneers is expected to generate 0.98 times more return on investment than Information Services. However, Ritchie Bros Auctioneers is 1.02 times less risky than Information Services. It trades about 0.09 of its potential returns per unit of risk. Information Services is currently generating about -0.05 per unit of risk. If you would invest  12,952  in Ritchie Bros Auctioneers on December 29, 2024 and sell it today you would earn a total of  1,065  from holding Ritchie Bros Auctioneers or generate 8.22% return on investment over 90 days.

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

Ritchie Bros Auctioneers  vs.  Information Services

Ritchie Bros Auctioneers

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ritchie Bros Auctioneers are ranked lower than 6 (%) 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.

Information Services

Risk-Adjusted Performance

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 very healthy fundamental indicators, Information Services is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Ritchie Bros and Information Services

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

The idea behind Ritchie Bros Auctioneers and Information Services 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.