Correlation Between REC Silicon and 5Th Planet

Can any of the company-specific risk be diversified away by investing in both REC Silicon and 5Th Planet 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 REC Silicon and 5Th Planet into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between REC Silicon ASA and 5Th Planet Games, you can compare the effects of market volatilities on REC Silicon and 5Th Planet 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 REC Silicon with a short position of 5Th Planet. Check out your portfolio center. Please also check ongoing floating volatility patterns of REC Silicon and 5Th Planet.

Diversification Opportunities for REC Silicon and 5Th Planet

0.09

Correlation Coefficient

REC Silicon  5Th Planet

Significant diversification

The 3 months correlation between REC and 5Th is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding REC Silicon ASA and 5Th Planet Games in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 5Th Planet Games and REC Silicon 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 REC Silicon ASA are associated (or correlated) with 5Th Planet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 5Th Planet Games has no effect on the direction of REC Silicon i.e., REC Silicon and 5Th Planet go up and down completely randomly.

Pair Corralation between REC Silicon and 5Th Planet

Assuming the 90 days trading horizon REC Silicon ASA is expected to under-perform the 5Th Planet. In addition to that, REC Silicon is 2.4 times more volatile than 5Th Planet Games. It trades about -0.05 of its total potential returns per unit of risk. 5Th Planet Games is currently generating about -0.02 per unit of volatility. If you would invest  129.00  in 5Th Planet Games on September 3, 2024 and sell it today you would lose (12.00) from holding 5Th Planet Games or give up 9.3% of portfolio value over 90 days.

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

REC Silicon ASA  vs.  5Th Planet Games

REC Silicon ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days REC Silicon ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

5Th Planet Games

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 5Th Planet Games has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, 5Th Planet is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with REC Silicon and 5Th Planet

The main advantage of trading using opposite REC Silicon and 5Th Planet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if REC Silicon position performs unexpectedly, 5Th Planet 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 5Th Planet will offset losses from the drop in 5Th Planet's long position.

The idea behind REC Silicon ASA and 5Th Planet Games 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 Transaction History module to view history of all your transactions and understand their impact on performance.