Correlation Between ReTo Eco and CONSOLIDATED

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

Diversification Opportunities for ReTo Eco and CONSOLIDATED

-0.11

Correlation Coefficient

ReTo Eco  CONSOLIDATED

Good diversification

The 3 months correlation between ReTo and CONSOLIDATED is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding ReTo Eco Solutions and CONSOLIDATED EDISON N in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CONSOLIDATED EDISON 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 CONSOLIDATED. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CONSOLIDATED EDISON has no effect on the direction of ReTo Eco i.e., ReTo Eco and CONSOLIDATED go up and down completely randomly.

Pair Corralation between ReTo Eco and CONSOLIDATED

Given the investment horizon of 90 days ReTo Eco Solutions is expected to generate 15.86 times more return on investment than CONSOLIDATED. However, ReTo Eco is 15.86 times more volatile than CONSOLIDATED EDISON N. It trades about 0.01 of its potential returns per unit of risk. CONSOLIDATED EDISON N is currently generating about -0.02 per unit of risk. If you would invest  880.00  in ReTo Eco Solutions on December 25, 2024 and sell it today you would lose (373.00) from holding ReTo Eco Solutions or give up 42.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	54.24%
Values	Daily Returns

ReTo Eco Solutions  vs.  CONSOLIDATED EDISON N

ReTo Eco Solutions

Risk-Adjusted Performance

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 very unfluctuating basic indicators, ReTo Eco may actually be approaching a critical reversion point that can send shares even higher in April 2025.

CONSOLIDATED EDISON

Risk-Adjusted Performance

Very Weak

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

Pair Trading with ReTo Eco and CONSOLIDATED

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

The idea behind ReTo Eco Solutions and CONSOLIDATED EDISON N 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.