Correlation Between ReTo Eco and African Agriculture
Can any of the company-specific risk be diversified away by investing in both ReTo Eco and African Agriculture 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 ReTo Eco and African Agriculture into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ReTo Eco Solutions and African Agriculture Holdings, you can compare the effects of market volatilities on ReTo Eco and African Agriculture 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 ReTo Eco with a short position of African Agriculture. Check out your portfolio center. Please also check ongoing floating volatility patterns of ReTo Eco and African Agriculture.
Diversification Opportunities for ReTo Eco and African Agriculture
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ReTo and African is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding ReTo Eco Solutions and African Agriculture Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on African Agriculture and ReTo Eco 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 ReTo Eco Solutions are associated (or correlated) with African Agriculture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of African Agriculture has no effect on the direction of ReTo Eco i.e., ReTo Eco and African Agriculture go up and down completely randomly.
Pair Corralation between ReTo Eco and African Agriculture
Given the investment horizon of 90 days ReTo Eco Solutions is expected to generate 1.64 times more return on investment than African Agriculture. However, ReTo Eco is 1.64 times more volatile than African Agriculture Holdings. It trades about 0.03 of its potential returns per unit of risk. African Agriculture Holdings is currently generating about 0.05 per unit of risk. If you would invest 4,300 in ReTo Eco Solutions on September 14, 2024 and sell it today you would lose (4,198) from holding ReTo Eco Solutions or give up 97.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 80.57% |
| Values | Daily Returns |
ReTo Eco Solutions vs. African Agriculture Holdings
Performance |
| Timeline |
| ReTo Eco Solutions |
| African Agriculture |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Solid
ReTo Eco and African Agriculture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ReTo Eco and African Agriculture
The main advantage of trading using opposite ReTo Eco and African Agriculture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ReTo Eco position performs unexpectedly, African Agriculture 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 African Agriculture will offset losses from the drop in African Agriculture's long position.| ReTo Eco vs. Martin Marietta Materials | ReTo Eco vs. Vulcan Materials | ReTo Eco vs. United States Lime | ReTo Eco vs. James Hardie Industries |
| African Agriculture vs. ReTo Eco Solutions | African Agriculture vs. Parker Hannifin | African Agriculture vs. Stepan Company | African Agriculture vs. Consol Energy |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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