Correlation Between Reka Industrial and CapMan Oyj

Can any of the company-specific risk be diversified away by investing in both Reka Industrial and CapMan Oyj 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 CapMan Oyj 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 CapMan Oyj B, you can compare the effects of market volatilities on Reka Industrial and CapMan Oyj 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 CapMan Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reka Industrial and CapMan Oyj.

Diversification Opportunities for Reka Industrial and CapMan Oyj

0.77

Correlation Coefficient

Reka Industrial  CapMan Oyj

Poor diversification

The 3 months correlation between Reka and CapMan is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Reka Industrial Oyj and CapMan Oyj B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CapMan Oyj B 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 CapMan Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CapMan Oyj B has no effect on the direction of Reka Industrial i.e., Reka Industrial and CapMan Oyj go up and down completely randomly.

Pair Corralation between Reka Industrial and CapMan Oyj

Assuming the 90 days trading horizon Reka Industrial Oyj is expected to generate 1.84 times more return on investment than CapMan Oyj. However, Reka Industrial is 1.84 times more volatile than CapMan Oyj B. It trades about 0.09 of its potential returns per unit of risk. CapMan Oyj B is currently generating about 0.12 per unit of risk. If you would invest  473.00  in Reka Industrial Oyj on October 8, 2024 and sell it today you would earn a total of  17.00  from holding Reka Industrial Oyj or generate 3.59% return on investment over 90 days.

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

Reka Industrial Oyj  vs.  CapMan Oyj B

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.

CapMan Oyj B

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CapMan Oyj B has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CapMan Oyj is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Reka Industrial and CapMan Oyj

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

The idea behind Reka Industrial Oyj and CapMan Oyj B 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.