Correlation Between RB Global and System1

Can any of the company-specific risk be diversified away by investing in both RB Global and System1 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 RB Global and System1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between RB Global and System1, you can compare the effects of market volatilities on RB Global and System1 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 RB Global with a short position of System1. Check out your portfolio center. Please also check ongoing floating volatility patterns of RB Global and System1.

Diversification Opportunities for RB Global and System1

-0.13

Correlation Coefficient

RB Global  System1

Good diversification

The 3 months correlation between RBA and System1 is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding RB Global and System1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on System1 and RB Global 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 RB Global are associated (or correlated) with System1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of System1 has no effect on the direction of RB Global i.e., RB Global and System1 go up and down completely randomly.

Pair Corralation between RB Global and System1

Considering the 90-day investment horizon RB Global is expected to under-perform the System1. But the stock apears to be less risky and, when comparing its historical volatility, RB Global is 8.45 times less risky than System1. The stock trades about -0.25 of its potential returns per unit of risk. The System1 is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  99.00  in System1 on October 25, 2024 and sell it today you would lose (13.80) from holding System1 or give up 13.94% of portfolio value over 90 days.

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

RB Global  vs.  System1

RB Global

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RB Global are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, RB Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

System1

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days System1 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, System1 is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with RB Global and System1

The main advantage of trading using opposite RB Global and System1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RB Global position performs unexpectedly, System1 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 System1 will offset losses from the drop in System1's long position.

The idea behind RB Global and System1 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.