Correlation Between Rea and Mach7 Technologies

Can any of the company-specific risk be diversified away by investing in both Rea and Mach7 Technologies 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 Mach7 Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Rea Group and Mach7 Technologies, you can compare the effects of market volatilities on Rea and Mach7 Technologies 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 Mach7 Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rea and Mach7 Technologies.

Diversification Opportunities for Rea and Mach7 Technologies

0.4

Correlation Coefficient

Rea  Mach7 Technologies

Very weak diversification

The 3 months correlation between Rea and Mach7 is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Rea Group and Mach7 Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mach7 Technologies 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 Mach7 Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mach7 Technologies has no effect on the direction of Rea i.e., Rea and Mach7 Technologies go up and down completely randomly.

Pair Corralation between Rea and Mach7 Technologies

Assuming the 90 days trading horizon Rea is expected to generate 19.47 times less return on investment than Mach7 Technologies. But when comparing it to its historical volatility, Rea Group is 1.15 times less risky than Mach7 Technologies. It trades about 0.01 of its potential returns per unit of risk. Mach7 Technologies is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  39.00  in Mach7 Technologies on December 3, 2024 and sell it today you would earn a total of  6.00  from holding Mach7 Technologies or generate 15.38% return on investment over 90 days.

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

Rea Group  vs.  Mach7 Technologies

Rea Group

Risk-Adjusted Performance

Very Weak

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

Mach7 Technologies

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mach7 Technologies are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Mach7 Technologies unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rea and Mach7 Technologies

The main advantage of trading using opposite Rea and Mach7 Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rea position performs unexpectedly, Mach7 Technologies 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 Mach7 Technologies will offset losses from the drop in Mach7 Technologies' long position.

The idea behind Rea Group and Mach7 Technologies 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.