Correlation Between Reacap Financial and Iron

Can any of the company-specific risk be diversified away by investing in both Reacap Financial and Iron 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 Iron 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 Iron And Steel, you can compare the effects of market volatilities on Reacap Financial and Iron 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 Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reacap Financial and Iron.

Diversification Opportunities for Reacap Financial and Iron

0.54

Correlation Coefficient

Reacap Financial  Iron

Very weak diversification

The 3 months correlation between Reacap and Iron is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Reacap Financial Investments and Iron And Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iron And Steel 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 Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iron And Steel has no effect on the direction of Reacap Financial i.e., Reacap Financial and Iron go up and down completely randomly.

Pair Corralation between Reacap Financial and Iron

Assuming the 90 days trading horizon Reacap Financial Investments is expected to generate 0.67 times more return on investment than Iron. However, Reacap Financial Investments is 1.49 times less risky than Iron. It trades about 0.04 of its potential returns per unit of risk. Iron And Steel is currently generating about 0.0 per unit of risk. If you would invest  684.00  in Reacap Financial Investments on December 5, 2024 and sell it today you would earn a total of  16.00  from holding Reacap Financial Investments or generate 2.34% return on investment over 90 days.

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

Reacap Financial Investments  vs.  Iron And Steel

Reacap Financial Inv

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Reacap Financial Investments are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Reacap Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Iron And Steel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Iron And Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Iron 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 Iron

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

The idea behind Reacap Financial Investments and Iron And Steel 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.