Correlation Between Remedy Entertainment and Reka Industrial

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

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

Diversification Opportunities for Remedy Entertainment and Reka Industrial

-0.01

Correlation Coefficient

Remedy Entertainment  Reka Industrial

Good diversification

The 3 months correlation between Remedy and Reka is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Remedy Entertainment Oyj and Reka Industrial Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reka Industrial Oyj and Remedy Entertainment 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 Remedy Entertainment Oyj are associated (or correlated) with Reka Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reka Industrial Oyj has no effect on the direction of Remedy Entertainment i.e., Remedy Entertainment and Reka Industrial go up and down completely randomly.

Pair Corralation between Remedy Entertainment and Reka Industrial

Assuming the 90 days trading horizon Remedy Entertainment is expected to generate 1.53 times less return on investment than Reka Industrial. But when comparing it to its historical volatility, Remedy Entertainment Oyj is 1.59 times less risky than Reka Industrial. It trades about 0.02 of its potential returns per unit of risk. Reka Industrial Oyj is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  428.00  in Reka Industrial Oyj on December 30, 2024 and sell it today you would earn a total of  4.00  from holding Reka Industrial Oyj or generate 0.93% return on investment over 90 days.

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

Remedy Entertainment Oyj  vs.  Reka Industrial Oyj

Remedy Entertainment Oyj

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Remedy Entertainment Oyj are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Reka Industrial Oyj

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Reka Industrial Oyj are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Remedy Entertainment and Reka Industrial

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

The idea behind Remedy Entertainment Oyj and Reka Industrial 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.