Correlation Between Reka Industrial and Aiforia Technologies

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

By analyzing existing cross correlation between Reka Industrial Oyj and Aiforia Technologies Oyj, you can compare the effects of market volatilities on Reka Industrial and Aiforia Technologies 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 Reka Industrial with a short position of Aiforia Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reka Industrial and Aiforia Technologies.

Diversification Opportunities for Reka Industrial and Aiforia Technologies

0.81

Correlation Coefficient

Reka Industrial  Aiforia Technologies

Very poor diversification

The 3 months correlation between Reka and Aiforia is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Reka Industrial Oyj and Aiforia Technologies Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aiforia Technologies Oyj and Reka Industrial 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 Reka Industrial Oyj are associated (or correlated) with Aiforia Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aiforia Technologies Oyj has no effect on the direction of Reka Industrial i.e., Reka Industrial and Aiforia Technologies go up and down completely randomly.

Pair Corralation between Reka Industrial and Aiforia Technologies

Assuming the 90 days trading horizon Reka Industrial Oyj is expected to generate 1.1 times more return on investment than Aiforia Technologies. However, Reka Industrial is 1.1 times more volatile than Aiforia Technologies Oyj. It trades about -0.02 of its potential returns per unit of risk. Aiforia Technologies Oyj is currently generating about -0.14 per unit of risk. If you would invest  510.00  in Reka Industrial Oyj on October 9, 2024 and sell it today you would lose (20.00) from holding Reka Industrial Oyj or give up 3.92% of portfolio value over 90 days.

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

Reka Industrial Oyj  vs.  Aiforia Technologies Oyj

Reka Industrial Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reka Industrial Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Reka Industrial is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Aiforia Technologies Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aiforia Technologies Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Reka Industrial and Aiforia Technologies

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

The idea behind Reka Industrial Oyj and Aiforia Technologies Oyj 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.