Correlation Between ReTo Eco and GENERAL

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

Diversification Opportunities for ReTo Eco and GENERAL

0.47

Correlation Coefficient

ReTo Eco  GENERAL

Very weak diversification

The 3 months correlation between ReTo and GENERAL is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding ReTo Eco Solutions and GENERAL ELEC CAP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GENERAL ELEC CAP 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 GENERAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GENERAL ELEC CAP has no effect on the direction of ReTo Eco i.e., ReTo Eco and GENERAL go up and down completely randomly.

Pair Corralation between ReTo Eco and GENERAL

Given the investment horizon of 90 days ReTo Eco Solutions is expected to under-perform the GENERAL. In addition to that, ReTo Eco is 3.29 times more volatile than GENERAL ELEC CAP. It trades about -0.08 of its total potential returns per unit of risk. GENERAL ELEC CAP is currently generating about 0.06 per unit of volatility. If you would invest  9,344  in GENERAL ELEC CAP on October 26, 2024 and sell it today you would earn a total of  197.00  from holding GENERAL ELEC CAP or generate 2.11% return on investment over 90 days.

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

ReTo Eco Solutions  vs.  GENERAL ELEC CAP

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.

GENERAL ELEC CAP

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GENERAL ELEC CAP are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, GENERAL is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ReTo Eco and GENERAL

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

The idea behind ReTo Eco Solutions and GENERAL ELEC CAP 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.