Correlation Between Reka Industrial and Remedy Entertainment

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

Diversification Opportunities for Reka Industrial and Remedy Entertainment

-0.19

Correlation Coefficient

Reka Industrial  Remedy Entertainment

Good diversification

The 3 months correlation between Reka and Remedy is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Reka Industrial Oyj and Remedy Entertainment Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Remedy Entertainment 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 Remedy Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Remedy Entertainment Oyj has no effect on the direction of Reka Industrial i.e., Reka Industrial and Remedy Entertainment go up and down completely randomly.

Pair Corralation between Reka Industrial and Remedy Entertainment

Assuming the 90 days trading horizon Reka Industrial Oyj is expected to generate 1.7 times more return on investment than Remedy Entertainment. However, Reka Industrial is 1.7 times more volatile than Remedy Entertainment Oyj. It trades about 0.01 of its potential returns per unit of risk. Remedy Entertainment Oyj is currently generating about -0.02 per unit of risk. If you would invest  472.00  in Reka Industrial Oyj on December 1, 2024 and sell it today you would lose (10.00) from holding Reka Industrial Oyj or give up 2.12% of portfolio value over 90 days.

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

Reka Industrial Oyj  vs.  Remedy Entertainment Oyj

Reka Industrial Oyj

Risk-Adjusted Performance

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.

Remedy Entertainment Oyj

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Reka Industrial and Remedy Entertainment

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

The idea behind Reka Industrial Oyj and Remedy Entertainment 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.