Correlation Between Ritchie Bros and European Residential
Can any of the company-specific risk be diversified away by investing in both Ritchie Bros and European Residential 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 Ritchie Bros and European Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ritchie Bros Auctioneers and European Residential Real, you can compare the effects of market volatilities on Ritchie Bros and European Residential 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 Ritchie Bros with a short position of European Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ritchie Bros and European Residential.
Diversification Opportunities for Ritchie Bros and European Residential
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ritchie and European is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Ritchie Bros Auctioneers and European Residential Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on European Residential Real and Ritchie Bros 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 Ritchie Bros Auctioneers are associated (or correlated) with European Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of European Residential Real has no effect on the direction of Ritchie Bros i.e., Ritchie Bros and European Residential go up and down completely randomly.
Pair Corralation between Ritchie Bros and European Residential
Assuming the 90 days trading horizon Ritchie Bros Auctioneers is expected to generate 0.11 times more return on investment than European Residential. However, Ritchie Bros Auctioneers is 9.29 times less risky than European Residential. It trades about -0.27 of its potential returns per unit of risk. European Residential Real is currently generating about -0.19 per unit of risk. If you would invest 13,507 in Ritchie Bros Auctioneers on October 14, 2024 and sell it today you would lose (701.00) from holding Ritchie Bros Auctioneers or give up 5.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ritchie Bros Auctioneers vs. European Residential Real
Performance |
| Timeline |
| Ritchie Bros Auctioneers |
| European Residential Real |
Ritchie Bros and European Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ritchie Bros and European Residential
The main advantage of trading using opposite Ritchie Bros and European Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ritchie Bros position performs unexpectedly, European Residential 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 European Residential will offset losses from the drop in European Residential's long position.| Ritchie Bros vs. Toromont Industries | Ritchie Bros vs. Stantec | Ritchie Bros vs. Finning International | Ritchie Bros vs. FirstService Corp |
| European Residential vs. BSR Real Estate | European Residential vs. Minto Apartment Real | European Residential vs. Nexus Real Estate | European Residential vs. Morguard North American |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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