Correlation Between Ritchie Bros and Questor Technology

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

Diversification Opportunities for Ritchie Bros and Questor Technology

-0.61

Correlation Coefficient

Ritchie Bros  Questor Technology

Excellent diversification

The 3 months correlation between Ritchie and Questor is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Ritchie Bros Auctioneers and Questor Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Questor Technology 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 Questor Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Questor Technology has no effect on the direction of Ritchie Bros i.e., Ritchie Bros and Questor Technology go up and down completely randomly.

Pair Corralation between Ritchie Bros and Questor Technology

Assuming the 90 days trading horizon Ritchie Bros Auctioneers is expected to generate 0.3 times more return on investment than Questor Technology. However, Ritchie Bros Auctioneers is 3.34 times less risky than Questor Technology. It trades about 0.1 of its potential returns per unit of risk. Questor Technology is currently generating about -0.03 per unit of risk. If you would invest  10,497  in Ritchie Bros Auctioneers on October 9, 2024 and sell it today you would earn a total of  2,599  from holding Ritchie Bros Auctioneers or generate 24.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.39%
Values	Daily Returns

Ritchie Bros Auctioneers  vs.  Questor Technology

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.

Questor Technology

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Questor Technology are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Questor Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ritchie Bros and Questor Technology

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

The idea behind Ritchie Bros Auctioneers and Questor Technology 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.