Correlation Between Ruentex Development and Eternal Materials
Can any of the company-specific risk be diversified away by investing in both Ruentex Development and Eternal Materials 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 Ruentex Development and Eternal Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ruentex Development Co and Eternal Materials Co, you can compare the effects of market volatilities on Ruentex Development and Eternal Materials 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 Ruentex Development with a short position of Eternal Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ruentex Development and Eternal Materials.
Diversification Opportunities for Ruentex Development and Eternal Materials
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Ruentex and Eternal is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Ruentex Development Co and Eternal Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eternal Materials and Ruentex Development 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 Ruentex Development Co are associated (or correlated) with Eternal Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eternal Materials has no effect on the direction of Ruentex Development i.e., Ruentex Development and Eternal Materials go up and down completely randomly.
Pair Corralation between Ruentex Development and Eternal Materials
Assuming the 90 days trading horizon Ruentex Development Co is expected to under-perform the Eternal Materials. But the stock apears to be less risky and, when comparing its historical volatility, Ruentex Development Co is 1.08 times less risky than Eternal Materials. The stock trades about -0.16 of its potential returns per unit of risk. The Eternal Materials Co is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest 2,995 in Eternal Materials Co on September 13, 2024 and sell it today you would lose (100.00) from holding Eternal Materials Co or give up 3.34% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ruentex Development Co vs. Eternal Materials Co
Performance |
| Timeline |
| Ruentex Development |
| Eternal Materials |
Ruentex Development and Eternal Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ruentex Development and Eternal Materials
The main advantage of trading using opposite Ruentex Development and Eternal Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ruentex Development position performs unexpectedly, Eternal Materials 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 Eternal Materials will offset losses from the drop in Eternal Materials' long position.| Ruentex Development vs. Ruentex Industries | Ruentex Development vs. Pou Chen Corp | Ruentex Development vs. Fubon Financial Holding | Ruentex Development vs. Cathay Financial Holding |
| Eternal Materials vs. Tainan Spinning Co | Eternal Materials vs. Lealea Enterprise Co | Eternal Materials vs. China Petrochemical Development | Eternal Materials vs. Ruentex Development Co |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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