Correlation Between Reka Industrial and Detection Technology
Can any of the company-specific risk be diversified away by investing in both Reka Industrial and Detection Technology 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 Reka Industrial and Detection Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Reka Industrial Oyj and Detection Technology OY, you can compare the effects of market volatilities on Reka Industrial and Detection Technology 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 Reka Industrial with a short position of Detection Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reka Industrial and Detection Technology.
Diversification Opportunities for Reka Industrial and Detection Technology
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Reka and Detection is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Reka Industrial Oyj and Detection Technology OY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Detection Technology and Reka Industrial 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 Reka Industrial Oyj are associated (or correlated) with Detection Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Detection Technology has no effect on the direction of Reka Industrial i.e., Reka Industrial and Detection Technology go up and down completely randomly.
Pair Corralation between Reka Industrial and Detection Technology
Assuming the 90 days trading horizon Reka Industrial Oyj is expected to generate 1.14 times more return on investment than Detection Technology. However, Reka Industrial is 1.14 times more volatile than Detection Technology OY. It trades about -0.22 of its potential returns per unit of risk. Detection Technology OY is currently generating about -0.45 per unit of risk. If you would invest 506.00 in Reka Industrial Oyj on August 24, 2024 and sell it today you would lose (52.00) from holding Reka Industrial Oyj or give up 10.28% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Reka Industrial Oyj vs. Detection Technology OY
Performance |
| Timeline |
| Reka Industrial Oyj |
| Detection Technology |
Reka Industrial and Detection Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Reka Industrial and Detection Technology
The main advantage of trading using opposite Reka Industrial and Detection Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reka Industrial position performs unexpectedly, Detection Technology 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 Detection Technology will offset losses from the drop in Detection Technology's long position.| Reka Industrial vs. Oma Saastopankki Oyj | Reka Industrial vs. Tecnotree Oyj | Reka Industrial vs. Tokmanni Group Oyj | Reka Industrial vs. Vaisala Oyj A |
| Detection Technology vs. SSH Communications Security | Detection Technology vs. Solteq PLC | Detection Technology vs. Innofactor Oyj | Detection Technology vs. Vaisala Oyj A |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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