Correlation Between ReTo Eco and Flexible Solutions

Can any of the company-specific risk be diversified away by investing in both ReTo Eco and Flexible Solutions 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 ReTo Eco and Flexible Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ReTo Eco Solutions and Flexible Solutions International, you can compare the effects of market volatilities on ReTo Eco and Flexible Solutions 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 ReTo Eco with a short position of Flexible Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of ReTo Eco and Flexible Solutions.

Diversification Opportunities for ReTo Eco and Flexible Solutions

-0.59

Correlation Coefficient

ReTo Eco  Flexible Solutions

Excellent diversification

The 3 months correlation between ReTo and Flexible is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding ReTo Eco Solutions and Flexible Solutions Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flexible Solutions and ReTo Eco 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 ReTo Eco Solutions are associated (or correlated) with Flexible Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flexible Solutions has no effect on the direction of ReTo Eco i.e., ReTo Eco and Flexible Solutions go up and down completely randomly.

Pair Corralation between ReTo Eco and Flexible Solutions

Given the investment horizon of 90 days ReTo Eco Solutions is expected to generate 1.66 times more return on investment than Flexible Solutions. However, ReTo Eco is 1.66 times more volatile than Flexible Solutions International. It trades about -0.1 of its potential returns per unit of risk. Flexible Solutions International is currently generating about -0.32 per unit of risk. If you would invest  100.00  in ReTo Eco Solutions on September 24, 2024 and sell it today you would lose (7.00) from holding ReTo Eco Solutions or give up 7.0% of portfolio value over 90 days.

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

ReTo Eco Solutions  vs.  Flexible Solutions Internation

ReTo Eco Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ReTo Eco Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Flexible Solutions

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Flexible Solutions International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Flexible Solutions may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ReTo Eco and Flexible Solutions

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

The idea behind ReTo Eco Solutions and Flexible Solutions International 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.