Correlation Between River and St Galler

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

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

Diversification Opportunities for River and St Galler

0.18

Correlation Coefficient

River  St Galler

Average diversification

The 3 months correlation between River and 0QQZ is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding River and Mercantile and St Galler Kantonalbank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on St Galler Kantonalbank and River 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 and Mercantile are associated (or correlated) with St Galler. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of St Galler Kantonalbank has no effect on the direction of River i.e., River and St Galler go up and down completely randomly.

Pair Corralation between River and St Galler

Assuming the 90 days trading horizon River is expected to generate 1.96 times less return on investment than St Galler. In addition to that, River is 1.08 times more volatile than St Galler Kantonalbank. It trades about 0.07 of its total potential returns per unit of risk. St Galler Kantonalbank is currently generating about 0.15 per unit of volatility. If you would invest  41,600  in St Galler Kantonalbank on October 6, 2024 and sell it today you would earn a total of  3,000  from holding St Galler Kantonalbank or generate 7.21% return on investment over 90 days.

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

River and Mercantile  vs.  St Galler Kantonalbank

River and Mercantile

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in River and Mercantile are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, River is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

St Galler Kantonalbank

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in St Galler Kantonalbank are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, St Galler may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with River and St Galler

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

The idea behind River and Mercantile and St Galler Kantonalbank 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.