Correlation Between Reka Industrial and United Bankers

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

Diversification Opportunities for Reka Industrial and United Bankers

0.04

Correlation Coefficient

Reka Industrial  United Bankers

Significant diversification

The 3 months correlation between Reka and United is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Reka Industrial Oyj and United Bankers Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Bankers 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 United Bankers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Bankers Oyj has no effect on the direction of Reka Industrial i.e., Reka Industrial and United Bankers go up and down completely randomly.

Pair Corralation between Reka Industrial and United Bankers

Assuming the 90 days trading horizon Reka Industrial Oyj is expected to generate 1.22 times more return on investment than United Bankers. However, Reka Industrial is 1.22 times more volatile than United Bankers Oyj. It trades about 0.05 of its potential returns per unit of risk. United Bankers Oyj is currently generating about -0.06 per unit of risk. If you would invest  522.00  in Reka Industrial Oyj on October 24, 2024 and sell it today you would earn a total of  36.00  from holding Reka Industrial Oyj or generate 6.9% return on investment over 90 days.

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

Reka Industrial Oyj  vs.  United Bankers Oyj

Reka Industrial Oyj

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Reka Industrial Oyj are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent technical and fundamental indicators, Reka Industrial exhibited solid returns over the last few months and may actually be approaching a breakup point.

United Bankers Oyj

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in United Bankers Oyj are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward indicators, United Bankers 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 United Bankers

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

The idea behind Reka Industrial Oyj and United Bankers 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.