Correlation Between RenoWorks Software and Idex Biometrics

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

By analyzing existing cross correlation between RenoWorks Software and Idex Biometrics ASA, you can compare the effects of market volatilities on RenoWorks Software and Idex Biometrics 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 RenoWorks Software with a short position of Idex Biometrics. Check out your portfolio center. Please also check ongoing floating volatility patterns of RenoWorks Software and Idex Biometrics.

Diversification Opportunities for RenoWorks Software and Idex Biometrics

-0.51

Correlation Coefficient

RenoWorks Software  Idex Biometrics

Excellent diversification

The 3 months correlation between RenoWorks and Idex is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding RenoWorks Software and Idex Biometrics ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Idex Biometrics ASA and RenoWorks Software 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 RenoWorks Software are associated (or correlated) with Idex Biometrics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Idex Biometrics ASA has no effect on the direction of RenoWorks Software i.e., RenoWorks Software and Idex Biometrics go up and down completely randomly.

Pair Corralation between RenoWorks Software and Idex Biometrics

Assuming the 90 days horizon RenoWorks Software is expected to generate 9.65 times more return on investment than Idex Biometrics. However, RenoWorks Software is 9.65 times more volatile than Idex Biometrics ASA. It trades about 0.06 of its potential returns per unit of risk. Idex Biometrics ASA is currently generating about -0.03 per unit of risk. If you would invest  2.10  in RenoWorks Software on October 7, 2024 and sell it today you would earn a total of  17.90  from holding RenoWorks Software or generate 852.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	26.31%
Values	Daily Returns

RenoWorks Software  vs.  Idex Biometrics ASA

RenoWorks Software

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RenoWorks Software are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating forward-looking signals, RenoWorks Software reported solid returns over the last few months and may actually be approaching a breakup point.

Idex Biometrics ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Idex Biometrics ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Idex Biometrics is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with RenoWorks Software and Idex Biometrics

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

The idea behind RenoWorks Software and Idex Biometrics 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.