Correlation Between Aeris Environmental and Rea
Can any of the company-specific risk be diversified away by investing in both Aeris Environmental and Rea 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 Aeris Environmental and Rea into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aeris Environmental and Rea Group, you can compare the effects of market volatilities on Aeris Environmental and Rea 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 Aeris Environmental with a short position of Rea. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aeris Environmental and Rea.
Diversification Opportunities for Aeris Environmental and Rea
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Aeris and Rea is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Aeris Environmental and Rea Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rea Group and Aeris Environmental 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 Aeris Environmental are associated (or correlated) with Rea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rea Group has no effect on the direction of Aeris Environmental i.e., Aeris Environmental and Rea go up and down completely randomly.
Pair Corralation between Aeris Environmental and Rea
Assuming the 90 days trading horizon Aeris Environmental is expected to under-perform the Rea. In addition to that, Aeris Environmental is 2.63 times more volatile than Rea Group. It trades about -0.27 of its total potential returns per unit of risk. Rea Group is currently generating about 0.17 per unit of volatility. If you would invest 24,311 in Rea Group on November 8, 2024 and sell it today you would earn a total of 1,179 from holding Rea Group or generate 4.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aeris Environmental vs. Rea Group
Performance |
| Timeline |
| Aeris Environmental |
| Rea Group |
Aeris Environmental and Rea Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aeris Environmental and Rea
The main advantage of trading using opposite Aeris Environmental and Rea positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aeris Environmental position performs unexpectedly, Rea 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 Rea will offset losses from the drop in Rea's long position.| Aeris Environmental vs. Ainsworth Game Technology | Aeris Environmental vs. Hudson Investment Group | Aeris Environmental vs. Mach7 Technologies | Aeris Environmental vs. High Tech Metals |
| Rea vs. Hutchison Telecommunications | Rea vs. Epsilon Healthcare | Rea vs. Sonic Healthcare | Rea vs. Beston Global Food |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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