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

Reckitt Benckiser  Polar Capital

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

Reckitt Benckiser

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Reckitt Benckiser Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Reckitt Benckiser may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Polar Capital Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Polar Capital Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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.

The idea behind Reckitt Benckiser Group and Polar Capital Technology 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.