Correlation Between ReTo Eco and 04685A2N0

Can any of the company-specific risk be diversified away by investing in both ReTo Eco and 04685A2N0 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 04685A2N0 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 US04685A2N06, you can compare the effects of market volatilities on ReTo Eco and 04685A2N0 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 04685A2N0. Check out your portfolio center. Please also check ongoing floating volatility patterns of ReTo Eco and 04685A2N0.

Diversification Opportunities for ReTo Eco and 04685A2N0

-0.45

Correlation Coefficient

ReTo Eco  04685A2N0

Very good diversification

The 3 months correlation between ReTo and 04685A2N0 is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding ReTo Eco Solutions and US04685A2N06 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US04685A2N06 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 04685A2N0. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US04685A2N06 has no effect on the direction of ReTo Eco i.e., ReTo Eco and 04685A2N0 go up and down completely randomly.

Pair Corralation between ReTo Eco and 04685A2N0

Given the investment horizon of 90 days ReTo Eco Solutions is expected to under-perform the 04685A2N0. In addition to that, ReTo Eco is 35.69 times more volatile than US04685A2N06. It trades about -0.06 of its total potential returns per unit of risk. US04685A2N06 is currently generating about 0.18 per unit of volatility. If you would invest  9,895  in US04685A2N06 on October 25, 2024 and sell it today you would earn a total of  10.00  from holding US04685A2N06 or generate 0.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	42.11%
Values	Daily Returns

ReTo Eco Solutions  vs.  US04685A2N06

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 unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

US04685A2N06

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in US04685A2N06 are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, 04685A2N0 is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ReTo Eco and 04685A2N0

The main advantage of trading using opposite ReTo Eco and 04685A2N0 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ReTo Eco position performs unexpectedly, 04685A2N0 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 04685A2N0 will offset losses from the drop in 04685A2N0's long position.

The idea behind ReTo Eco Solutions and US04685A2N06 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.