Correlation Between River and Beeks Trading

Can any of the company-specific risk be diversified away by investing in both River and Beeks Trading 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 Beeks Trading 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 Beeks Trading, you can compare the effects of market volatilities on River and Beeks Trading 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 Beeks Trading. Check out your portfolio center. Please also check ongoing floating volatility patterns of River and Beeks Trading.

Diversification Opportunities for River and Beeks Trading

0.31

Correlation Coefficient

River  Beeks Trading

Weak diversification

The 3 months correlation between River and Beeks is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding River and Mercantile and Beeks Trading in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beeks Trading 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 Beeks Trading. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beeks Trading has no effect on the direction of River i.e., River and Beeks Trading go up and down completely randomly.

Pair Corralation between River and Beeks Trading

Assuming the 90 days trading horizon River and Mercantile is expected to under-perform the Beeks Trading. But the stock apears to be less risky and, when comparing its historical volatility, River and Mercantile is 11.08 times less risky than Beeks Trading. The stock trades about -0.15 of its potential returns per unit of risk. The Beeks Trading is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  27,600  in Beeks Trading on October 23, 2024 and sell it today you would lose (200.00) from holding Beeks Trading or give up 0.72% of portfolio value over 90 days.

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

River and Mercantile  vs.  Beeks Trading

River and Mercantile

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in River and Mercantile are ranked lower than 4 (%) 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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Beeks Trading

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Beeks Trading are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Beeks Trading exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with River and Beeks Trading

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

The idea behind River and Mercantile and Beeks Trading 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.