Correlation Between Reacap Financial and Act Financial

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

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

Diversification Opportunities for Reacap Financial and Act Financial

-0.31

Correlation Coefficient

Reacap Financial  Act Financial

Very good diversification

The 3 months correlation between Reacap and Act is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Reacap Financial Investments and Act Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Act Financial and Reacap Financial 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 Reacap Financial Investments are associated (or correlated) with Act Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Act Financial has no effect on the direction of Reacap Financial i.e., Reacap Financial and Act Financial go up and down completely randomly.

Pair Corralation between Reacap Financial and Act Financial

Assuming the 90 days trading horizon Reacap Financial Investments is expected to generate 0.77 times more return on investment than Act Financial. However, Reacap Financial Investments is 1.29 times less risky than Act Financial. It trades about 0.08 of its potential returns per unit of risk. Act Financial is currently generating about -0.03 per unit of risk. If you would invest  342.00  in Reacap Financial Investments on September 15, 2024 and sell it today you would earn a total of  349.00  from holding Reacap Financial Investments or generate 102.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	20.41%
Values	Daily Returns

Reacap Financial Investments  vs.  Act Financial

Reacap Financial Inv

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Reacap Financial Investments are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Reacap Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Act Financial

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Act Financial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Act Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Reacap Financial and Act Financial

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

The idea behind Reacap Financial Investments and Act Financial 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.