Correlation Between Ree Automotive and Fossil

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

By analyzing existing cross correlation between Ree Automotive Holding and Fossil Group, you can compare the effects of market volatilities on Ree Automotive and Fossil 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 Ree Automotive with a short position of Fossil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ree Automotive and Fossil.

Diversification Opportunities for Ree Automotive and Fossil

0.87

Correlation Coefficient

Ree Automotive  Fossil

Very poor diversification

The 3 months correlation between Ree and Fossil is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Ree Automotive Holding and Fossil Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fossil Group and Ree Automotive 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 Ree Automotive Holding are associated (or correlated) with Fossil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fossil Group has no effect on the direction of Ree Automotive i.e., Ree Automotive and Fossil go up and down completely randomly.

Pair Corralation between Ree Automotive and Fossil

Considering the 90-day investment horizon Ree Automotive Holding is expected to under-perform the Fossil. In addition to that, Ree Automotive is 1.04 times more volatile than Fossil Group. It trades about -0.22 of its total potential returns per unit of risk. Fossil Group is currently generating about -0.1 per unit of volatility. If you would invest  189.00  in Fossil Group on December 27, 2024 and sell it today you would lose (68.00) from holding Fossil Group or give up 35.98% of portfolio value over 90 days.

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

Ree Automotive Holding  vs.  Fossil Group

Ree Automotive Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ree Automotive Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Fossil Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fossil Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Ree Automotive and Fossil

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

The idea behind Ree Automotive Holding and Fossil Group 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.