Correlation Between Rea and Technology One

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

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

Diversification Opportunities for Rea and Technology One

0.77

Correlation Coefficient

Rea  Technology One

Poor diversification

The 3 months correlation between Rea and Technology is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Rea Group and Technology One in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Technology One 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 Technology One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Technology One has no effect on the direction of Rea i.e., Rea and Technology One go up and down completely randomly.

Pair Corralation between Rea and Technology One

Assuming the 90 days trading horizon Rea Group is expected to under-perform the Technology One. In addition to that, Rea is 1.32 times more volatile than Technology One. It trades about -0.09 of its total potential returns per unit of risk. Technology One is currently generating about -0.09 per unit of volatility. If you would invest  3,155  in Technology One on October 10, 2024 and sell it today you would lose (75.00) from holding Technology One or give up 2.38% of portfolio value over 90 days.

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

Rea Group  vs.  Technology One

Rea Group

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rea Group are ranked lower than 11 (%) 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.

Technology One

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Technology One are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Technology One unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rea and Technology One

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

The idea behind Rea Group and Technology One 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.