Correlation Between Stagwell and ReTo Eco

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

By analyzing existing cross correlation between Stagwell and ReTo Eco Solutions, you can compare the effects of market volatilities on Stagwell and ReTo Eco 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 Stagwell with a short position of ReTo Eco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stagwell and ReTo Eco.

Diversification Opportunities for Stagwell and ReTo Eco

0.49

Correlation Coefficient

Stagwell  ReTo Eco

Very weak diversification

The 3 months correlation between Stagwell and ReTo is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Stagwell and ReTo Eco Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ReTo Eco Solutions and Stagwell 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 Stagwell are associated (or correlated) with ReTo Eco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ReTo Eco Solutions has no effect on the direction of Stagwell i.e., Stagwell and ReTo Eco go up and down completely randomly.

Pair Corralation between Stagwell and ReTo Eco

Given the investment horizon of 90 days Stagwell is expected to under-perform the ReTo Eco. But the stock apears to be less risky and, when comparing its historical volatility, Stagwell is 6.31 times less risky than ReTo Eco. The stock trades about -0.04 of its potential returns per unit of risk. The ReTo Eco Solutions is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  880.00  in ReTo Eco Solutions on December 25, 2024 and sell it today you would lose (373.00) from holding ReTo Eco Solutions or give up 42.39% of portfolio value over 90 days.

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

Stagwell  vs.  ReTo Eco Solutions

Stagwell

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stagwell has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Stagwell is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

ReTo Eco Solutions

Risk-Adjusted Performance

Very Weak

Over the last 90 days ReTo Eco Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very unfluctuating basic indicators, ReTo Eco may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Stagwell and ReTo Eco

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

The idea behind Stagwell and ReTo Eco Solutions 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.