Correlation Between RCL Foods and Reinet Investments

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

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

Diversification Opportunities for RCL Foods and Reinet Investments

-0.7

Correlation Coefficient

RCL Foods  Reinet Investments

Excellent diversification

The 3 months correlation between RCL and Reinet is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding RCL Foods and Reinet Investments SCA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reinet Investments SCA and RCL Foods 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 RCL Foods are associated (or correlated) with Reinet Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reinet Investments SCA has no effect on the direction of RCL Foods i.e., RCL Foods and Reinet Investments go up and down completely randomly.

Pair Corralation between RCL Foods and Reinet Investments

Assuming the 90 days trading horizon RCL Foods is expected to generate 3.63 times less return on investment than Reinet Investments. But when comparing it to its historical volatility, RCL Foods is 1.3 times less risky than Reinet Investments. It trades about 0.04 of its potential returns per unit of risk. Reinet Investments SCA is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  4,512,400  in Reinet Investments SCA on October 23, 2024 and sell it today you would earn a total of  222,600  from holding Reinet Investments SCA or generate 4.93% return on investment over 90 days.

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

RCL Foods  vs.  Reinet Investments SCA

RCL Foods

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in RCL Foods are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, RCL Foods is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Reinet Investments SCA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reinet Investments SCA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Reinet Investments is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with RCL Foods and Reinet Investments

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

The idea behind RCL Foods and Reinet Investments SCA 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.