Correlation Between Ripley Corp and Hites SA

Can any of the company-specific risk be diversified away by investing in both Ripley Corp and Hites SA 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 Ripley Corp and Hites SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ripley Corp and Hites SA, you can compare the effects of market volatilities on Ripley Corp and Hites SA 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 Ripley Corp with a short position of Hites SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ripley Corp and Hites SA.

Diversification Opportunities for Ripley Corp and Hites SA

0.37

Correlation Coefficient

Ripley Corp  Hites SA

Weak diversification

The 3 months correlation between Ripley and Hites is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Ripley Corp and Hites SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hites SA and Ripley Corp 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 Ripley Corp are associated (or correlated) with Hites SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hites SA has no effect on the direction of Ripley Corp i.e., Ripley Corp and Hites SA go up and down completely randomly.

Pair Corralation between Ripley Corp and Hites SA

Assuming the 90 days trading horizon Ripley Corp is expected to generate 0.57 times more return on investment than Hites SA. However, Ripley Corp is 1.74 times less risky than Hites SA. It trades about 0.23 of its potential returns per unit of risk. Hites SA is currently generating about 0.01 per unit of risk. If you would invest  27,055  in Ripley Corp on December 4, 2024 and sell it today you would earn a total of  4,043  from holding Ripley Corp or generate 14.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.72%
Values	Daily Returns

Ripley Corp  vs.  Hites SA

Ripley Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ripley Corp are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Ripley Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Hites SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hites SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Hites SA is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ripley Corp and Hites SA

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

The idea behind Ripley Corp and Hites SA 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.