Correlation Between Rea and Star Combo

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

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

Diversification Opportunities for Rea and Star Combo

-0.61

Correlation Coefficient

Rea  Star Combo

Excellent diversification

The 3 months correlation between Rea and Star is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Rea Group and Star Combo Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Star Combo Pharma 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 Star Combo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Star Combo Pharma has no effect on the direction of Rea i.e., Rea and Star Combo go up and down completely randomly.

Pair Corralation between Rea and Star Combo

Assuming the 90 days trading horizon Rea Group is expected to under-perform the Star Combo. But the stock apears to be less risky and, when comparing its historical volatility, Rea Group is 3.23 times less risky than Star Combo. The stock trades about -0.25 of its potential returns per unit of risk. The Star Combo Pharma is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  14.00  in Star Combo Pharma on October 6, 2024 and sell it today you would earn a total of  1.00  from holding Star Combo Pharma or generate 7.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

Rea Group  vs.  Star Combo Pharma

Rea Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rea Group are ranked lower than 10 (%) 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.

Star Combo Pharma

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Star Combo Pharma are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Star Combo unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rea and Star Combo

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

The idea behind Rea Group and Star Combo Pharma 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.