Correlation Between River Tech and Okea ASA

Can any of the company-specific risk be diversified away by investing in both River Tech and Okea ASA 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 River Tech and Okea ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between River Tech plc and Okea ASA, you can compare the effects of market volatilities on River Tech and Okea ASA 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 River Tech with a short position of Okea ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of River Tech and Okea ASA.

Diversification Opportunities for River Tech and Okea ASA

0.29

Correlation Coefficient

River Tech  Okea ASA

Modest diversification

The 3 months correlation between River and Okea is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding River Tech plc and Okea ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Okea ASA and River Tech 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 River Tech plc are associated (or correlated) with Okea ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Okea ASA has no effect on the direction of River Tech i.e., River Tech and Okea ASA go up and down completely randomly.

Pair Corralation between River Tech and Okea ASA

Assuming the 90 days trading horizon River Tech plc is expected to generate 1.6 times more return on investment than Okea ASA. However, River Tech is 1.6 times more volatile than Okea ASA. It trades about -0.02 of its potential returns per unit of risk. Okea ASA is currently generating about -0.06 per unit of risk. If you would invest  1,860  in River Tech plc on December 30, 2024 and sell it today you would lose (130.00) from holding River Tech plc or give up 6.99% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

River Tech plc  vs.  Okea ASA

River Tech plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days River Tech plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, River Tech is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Okea ASA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Okea ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with River Tech and Okea ASA

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

The idea behind River Tech plc and Okea ASA 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.