Correlation Between Richtech Robotics and NET Power

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

By analyzing existing cross correlation between Richtech Robotics Class and NET Power, you can compare the effects of market volatilities on Richtech Robotics and NET Power 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 Richtech Robotics with a short position of NET Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Richtech Robotics and NET Power.

Diversification Opportunities for Richtech Robotics and NET Power

-0.39

Correlation Coefficient

Richtech Robotics  NET Power

Very good diversification

The 3 months correlation between Richtech and NET is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Richtech Robotics Class and NET Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NET Power and Richtech Robotics 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 Richtech Robotics Class are associated (or correlated) with NET Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NET Power has no effect on the direction of Richtech Robotics i.e., Richtech Robotics and NET Power go up and down completely randomly.

Pair Corralation between Richtech Robotics and NET Power

Allowing for the 90-day total investment horizon Richtech Robotics Class is expected to generate 4.01 times more return on investment than NET Power. However, Richtech Robotics is 4.01 times more volatile than NET Power. It trades about 0.16 of its potential returns per unit of risk. NET Power is currently generating about -0.18 per unit of risk. If you would invest  74.00  in Richtech Robotics Class on December 5, 2024 and sell it today you would earn a total of  97.00  from holding Richtech Robotics Class or generate 131.08% return on investment over 90 days.

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

Richtech Robotics Class  vs.  NET Power

Richtech Robotics Class

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Richtech Robotics Class are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Richtech Robotics reported solid returns over the last few months and may actually be approaching a breakup point.

NET Power

Risk-Adjusted Performance

Very Weak

Over the last 90 days NET Power has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Richtech Robotics and NET Power

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

The idea behind Richtech Robotics Class and NET Power 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.