Correlation Between Rex Trueform and Alexander Forbes

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

By analyzing existing cross correlation between Rex Trueform Group and Alexander Forbes Grp, you can compare the effects of market volatilities on Rex Trueform and Alexander Forbes 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 Rex Trueform with a short position of Alexander Forbes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rex Trueform and Alexander Forbes.

Diversification Opportunities for Rex Trueform and Alexander Forbes

0.15

Correlation Coefficient

Rex Trueform  Alexander Forbes

Average diversification

The 3 months correlation between Rex and Alexander is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Rex Trueform Group and Alexander Forbes Grp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alexander Forbes Grp and Rex Trueform 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 Rex Trueform Group are associated (or correlated) with Alexander Forbes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alexander Forbes Grp has no effect on the direction of Rex Trueform i.e., Rex Trueform and Alexander Forbes go up and down completely randomly.

Pair Corralation between Rex Trueform and Alexander Forbes

Assuming the 90 days trading horizon Rex Trueform Group is not expected to generate positive returns. However, Rex Trueform Group is 106.22 times less risky than Alexander Forbes. It waists most of its returns potential to compensate for thr risk taken. Alexander Forbes is generating about 0.27 per unit of risk. If you would invest  71,500  in Alexander Forbes Grp on October 10, 2024 and sell it today you would earn a total of  12,500  from holding Alexander Forbes Grp or generate 17.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	89.47%
Values	Daily Returns

Rex Trueform Group  vs.  Alexander Forbes Grp

Rex Trueform Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rex Trueform Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Rex Trueform is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Alexander Forbes Grp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alexander Forbes Grp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Alexander Forbes exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rex Trueform and Alexander Forbes

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

The idea behind Rex Trueform Group and Alexander Forbes Grp 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.