Correlation Between REINET INVESTMENTS and OtelloASA

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

By analyzing existing cross correlation between REINET INVESTMENTS SCA and Otello ASA, you can compare the effects of market volatilities on REINET INVESTMENTS and OtelloASA 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 REINET INVESTMENTS with a short position of OtelloASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of REINET INVESTMENTS and OtelloASA.

Diversification Opportunities for REINET INVESTMENTS and OtelloASA

-0.29

Correlation Coefficient

REINET INVESTMENTS  OtelloASA

Very good diversification

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

Pair Corralation between REINET INVESTMENTS and OtelloASA

Assuming the 90 days horizon REINET INVESTMENTS SCA is expected to generate 1.68 times more return on investment than OtelloASA. However, REINET INVESTMENTS is 1.68 times more volatile than Otello ASA. It trades about 0.02 of its potential returns per unit of risk. Otello ASA is currently generating about -0.06 per unit of risk. If you would invest  2,420  in REINET INVESTMENTS SCA on September 12, 2024 and sell it today you would earn a total of  20.00  from holding REINET INVESTMENTS SCA or generate 0.83% return on investment over 90 days.

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

REINET INVESTMENTS SCA  vs.  Otello ASA

REINET INVESTMENTS SCA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in REINET INVESTMENTS SCA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, REINET INVESTMENTS is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Otello ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Otello ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with REINET INVESTMENTS and OtelloASA

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

The idea behind REINET INVESTMENTS SCA and Otello 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.