Correlation Between Rea and Stelar Metals
Can any of the company-specific risk be diversified away by investing in both Rea and Stelar Metals 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 Rea and Stelar Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rea Group and Stelar Metals, you can compare the effects of market volatilities on Rea and Stelar Metals 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 Rea with a short position of Stelar Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rea and Stelar Metals.
Diversification Opportunities for Rea and Stelar Metals
-0.79 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Rea and Stelar is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Rea Group and Stelar Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stelar Metals and Rea 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 Rea Group are associated (or correlated) with Stelar Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stelar Metals has no effect on the direction of Rea i.e., Rea and Stelar Metals go up and down completely randomly.
Pair Corralation between Rea and Stelar Metals
Assuming the 90 days trading horizon Rea Group is expected to generate 0.54 times more return on investment than Stelar Metals. However, Rea Group is 1.84 times less risky than Stelar Metals. It trades about -0.05 of its potential returns per unit of risk. Stelar Metals is currently generating about -0.04 per unit of risk. If you would invest 24,148 in Rea Group on September 14, 2024 and sell it today you would lose (457.00) from holding Rea Group or give up 1.89% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rea Group vs. Stelar Metals
Performance |
| Timeline |
| Rea Group |
| Stelar Metals |
Rea and Stelar Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rea and Stelar Metals
The main advantage of trading using opposite Rea and Stelar Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rea position performs unexpectedly, Stelar Metals 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 Stelar Metals will offset losses from the drop in Stelar Metals' long position.The idea behind Rea Group and Stelar Metals 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.| Stelar Metals vs. Northern Star Resources | Stelar Metals vs. Evolution Mining | Stelar Metals vs. Bluescope Steel | Stelar Metals vs. Sandfire Resources NL |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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