Correlation Between Auto Trader and Reckitt Benckiser
Can any of the company-specific risk be diversified away by investing in both Auto Trader and Reckitt Benckiser 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 Auto Trader and Reckitt Benckiser into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Auto Trader Group and Reckitt Benckiser Group, you can compare the effects of market volatilities on Auto Trader and Reckitt Benckiser 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 Auto Trader with a short position of Reckitt Benckiser. Check out your portfolio center. Please also check ongoing floating volatility patterns of Auto Trader and Reckitt Benckiser.
Diversification Opportunities for Auto Trader and Reckitt Benckiser
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Auto and Reckitt is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Auto Trader Group and Reckitt Benckiser Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reckitt Benckiser and Auto Trader 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 Auto Trader Group are associated (or correlated) with Reckitt Benckiser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reckitt Benckiser has no effect on the direction of Auto Trader i.e., Auto Trader and Reckitt Benckiser go up and down completely randomly.
Pair Corralation between Auto Trader and Reckitt Benckiser
Assuming the 90 days trading horizon Auto Trader Group is expected to under-perform the Reckitt Benckiser. But the stock apears to be less risky and, when comparing its historical volatility, Auto Trader Group is 1.01 times less risky than Reckitt Benckiser. The stock trades about -0.42 of its potential returns per unit of risk. The Reckitt Benckiser Group is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 470,900 in Reckitt Benckiser Group on October 7, 2024 and sell it today you would earn a total of 16,000 from holding Reckitt Benckiser Group or generate 3.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Auto Trader Group vs. Reckitt Benckiser Group
Performance |
| Timeline |
| Auto Trader Group |
| Reckitt Benckiser |
Auto Trader and Reckitt Benckiser Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Auto Trader and Reckitt Benckiser
The main advantage of trading using opposite Auto Trader and Reckitt Benckiser positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Auto Trader position performs unexpectedly, Reckitt Benckiser 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 Reckitt Benckiser will offset losses from the drop in Reckitt Benckiser's long position.| Auto Trader vs. Norwegian Air Shuttle | Auto Trader vs. International Biotechnology Trust | Auto Trader vs. Cardinal Health | Auto Trader vs. Sealed Air Corp |
| Reckitt Benckiser vs. Scandinavian Tobacco Group | Reckitt Benckiser vs. International Biotechnology Trust | Reckitt Benckiser vs. Discover Financial Services | Reckitt Benckiser vs. Cincinnati Financial Corp |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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