Correlation Between Reckitt Benckiser and Polar Capital
Can any of the company-specific risk be diversified away by investing in both Reckitt Benckiser and Polar Capital 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 Reckitt Benckiser and Polar Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Reckitt Benckiser Group and Polar Capital Technology, you can compare the effects of market volatilities on Reckitt Benckiser and Polar Capital 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 Reckitt Benckiser with a short position of Polar Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reckitt Benckiser and Polar Capital.
Diversification Opportunities for Reckitt Benckiser and Polar Capital
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Reckitt and Polar is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Reckitt Benckiser Group and Polar Capital Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polar Capital Technology and Reckitt Benckiser 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 Reckitt Benckiser Group are associated (or correlated) with Polar Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polar Capital Technology has no effect on the direction of Reckitt Benckiser i.e., Reckitt Benckiser and Polar Capital go up and down completely randomly.
Pair Corralation between Reckitt Benckiser and Polar Capital
Assuming the 90 days trading horizon Reckitt Benckiser Group is expected to generate 0.54 times more return on investment than Polar Capital. However, Reckitt Benckiser Group is 1.85 times less risky than Polar Capital. It trades about 0.13 of its potential returns per unit of risk. Polar Capital Technology is currently generating about -0.11 per unit of risk. If you would invest 480,700 in Reckitt Benckiser Group on December 30, 2024 and sell it today you would earn a total of 42,500 from holding Reckitt Benckiser Group or generate 8.84% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Reckitt Benckiser Group vs. Polar Capital Technology
Performance |
Timeline |
Reckitt Benckiser |
Polar Capital Technology |
Reckitt Benckiser and Polar Capital Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Reckitt Benckiser and Polar Capital
The main advantage of trading using opposite Reckitt Benckiser and Polar Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reckitt Benckiser position performs unexpectedly, Polar Capital 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 Polar Capital will offset losses from the drop in Polar Capital's long position.Reckitt Benckiser vs. Flutter Entertainment PLC | Reckitt Benckiser vs. Monster Beverage Corp | Reckitt Benckiser vs. Grand Vision Media | Reckitt Benckiser vs. LBG Media PLC |
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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