Correlation Between International Agricultural and Reacap Financial
Can any of the company-specific risk be diversified away by investing in both International Agricultural and Reacap Financial 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 International Agricultural and Reacap Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Agricultural Products and Reacap Financial Investments, you can compare the effects of market volatilities on International Agricultural and Reacap Financial 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 International Agricultural with a short position of Reacap Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Agricultural and Reacap Financial.
Diversification Opportunities for International Agricultural and Reacap Financial
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between International and Reacap is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding International Agricultural Pro and Reacap Financial Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reacap Financial Inv and International Agricultural 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 International Agricultural Products are associated (or correlated) with Reacap Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reacap Financial Inv has no effect on the direction of International Agricultural i.e., International Agricultural and Reacap Financial go up and down completely randomly.
Pair Corralation between International Agricultural and Reacap Financial
Assuming the 90 days trading horizon International Agricultural Products is expected to generate 0.7 times more return on investment than Reacap Financial. However, International Agricultural Products is 1.43 times less risky than Reacap Financial. It trades about -0.27 of its potential returns per unit of risk. Reacap Financial Investments is currently generating about -0.37 per unit of risk. If you would invest 1,978 in International Agricultural Products on September 19, 2024 and sell it today you would lose (155.00) from holding International Agricultural Products or give up 7.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Agricultural Pro vs. Reacap Financial Investments
Performance |
| Timeline |
| International Agricultural |
| Reacap Financial Inv |
International Agricultural and Reacap Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Agricultural and Reacap Financial
The main advantage of trading using opposite International Agricultural and Reacap Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Agricultural position performs unexpectedly, Reacap Financial 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 Reacap Financial will offset losses from the drop in Reacap Financial's long position.The idea behind International Agricultural Products and Reacap Financial Investments 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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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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