Correlation Between RH and Gap,

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Can any of the company-specific risk be diversified away by investing in both RH and Gap, 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 RH and Gap, into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RH and The Gap,, you can compare the effects of market volatilities on RH and Gap, 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 RH with a short position of Gap,. Check out your portfolio center. Please also check ongoing floating volatility patterns of RH and Gap,.

Diversification Opportunities for RH and Gap,

0.84
  Correlation Coefficient
 RH

Very poor diversification

The 3 months correlation between RH and Gap, is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding RH and The Gap, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gap, and RH 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 RH are associated (or correlated) with Gap,. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gap, has no effect on the direction of RH i.e., RH and Gap, go up and down completely randomly.

Pair Corralation between RH and Gap,

Allowing for the 90-day total investment horizon RH is expected to generate 2.61 times more return on investment than Gap,. However, RH is 2.61 times more volatile than The Gap,. It trades about 0.04 of its potential returns per unit of risk. The Gap, is currently generating about -0.17 per unit of risk. If you would invest  39,678  in RH on October 10, 2024 and sell it today you would earn a total of  704.00  from holding RH or generate 1.77% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

RH  vs.  The Gap,

 Performance 
       Timeline  
RH 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in RH are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain technical indicators, RH demonstrated solid returns over the last few months and may actually be approaching a breakup point.
Gap, 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in The Gap, are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Gap, reported solid returns over the last few months and may actually be approaching a breakup point.

RH and Gap, Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with RH and Gap,

The main advantage of trading using opposite RH and Gap, positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RH position performs unexpectedly, Gap, 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 Gap, will offset losses from the drop in Gap,'s long position.
The idea behind RH and The Gap, 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.
Check out your portfolio center.
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.

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