Correlation Between StateHouse Holdings and RIV Capital

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

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

Diversification Opportunities for StateHouse Holdings and RIV Capital

0.2

Correlation Coefficient

StateHouse Holdings  RIV Capital

Modest diversification

The 3 months correlation between StateHouse and RIV is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding StateHouse Holdings and RIV Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RIV Capital and StateHouse Holdings 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 StateHouse Holdings are associated (or correlated) with RIV Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RIV Capital has no effect on the direction of StateHouse Holdings i.e., StateHouse Holdings and RIV Capital go up and down completely randomly.

Pair Corralation between StateHouse Holdings and RIV Capital

Assuming the 90 days horizon StateHouse Holdings is expected to generate 1.52 times more return on investment than RIV Capital. However, StateHouse Holdings is 1.52 times more volatile than RIV Capital. It trades about 0.0 of its potential returns per unit of risk. RIV Capital is currently generating about -0.01 per unit of risk. If you would invest  2.50  in StateHouse Holdings on September 3, 2024 and sell it today you would lose (1.00) from holding StateHouse Holdings or give up 40.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

StateHouse Holdings  vs.  RIV Capital

StateHouse Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days StateHouse Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, StateHouse Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

RIV Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RIV Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, RIV Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with StateHouse Holdings and RIV Capital

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

The idea behind StateHouse Holdings and RIV Capital 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.