Correlation Between Rea and COG Financial

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

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

Diversification Opportunities for Rea and COG Financial

-0.49

Correlation Coefficient

Rea  COG Financial

Very good diversification

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

Pair Corralation between Rea and COG Financial

Assuming the 90 days trading horizon Rea Group is expected to generate 0.71 times more return on investment than COG Financial. However, Rea Group is 1.41 times less risky than COG Financial. It trades about 0.1 of its potential returns per unit of risk. COG Financial Services is currently generating about -0.01 per unit of risk. If you would invest  11,357  in Rea Group on October 3, 2024 and sell it today you would earn a total of  11,974  from holding Rea Group or generate 105.43% return on investment over 90 days.

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

Rea Group  vs.  COG Financial Services

Rea Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rea Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Rea may actually be approaching a critical reversion point that can send shares even higher in February 2025.

COG Financial Services

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in COG Financial Services are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, COG Financial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Rea and COG Financial

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

The idea behind Rea Group and COG Financial 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 Stocks Directory module to find actively traded stocks across global markets.