Correlation Between Recrusul and Target

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

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

Diversification Opportunities for Recrusul and Target

-0.02

Correlation Coefficient

Recrusul  Target

Good diversification

The 3 months correlation between Recrusul and Target is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Recrusul SA and Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target and Recrusul 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 Recrusul SA are associated (or correlated) with Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target has no effect on the direction of Recrusul i.e., Recrusul and Target go up and down completely randomly.

Pair Corralation between Recrusul and Target

Assuming the 90 days trading horizon Recrusul SA is expected to under-perform the Target. In addition to that, Recrusul is 3.2 times more volatile than Target. It trades about -0.62 of its total potential returns per unit of risk. Target is currently generating about 0.08 per unit of volatility. If you would invest  82,620  in Target on October 10, 2024 and sell it today you would earn a total of  1,929  from holding Target or generate 2.33% return on investment over 90 days.

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

Recrusul SA  vs.  Target

Recrusul SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Recrusul SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Preferred Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Target

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Target has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Target is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Recrusul and Target

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

The idea behind Recrusul SA and Target 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.