Correlation Between REX American and Sociedad Quimica
Can any of the company-specific risk be diversified away by investing in both REX American and Sociedad Quimica 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 REX American and Sociedad Quimica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between REX American Resources and Sociedad Quimica y, you can compare the effects of market volatilities on REX American and Sociedad Quimica 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 REX American with a short position of Sociedad Quimica. Check out your portfolio center. Please also check ongoing floating volatility patterns of REX American and Sociedad Quimica.
Diversification Opportunities for REX American and Sociedad Quimica
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between REX and Sociedad is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding REX American Resources and Sociedad Quimica y in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sociedad Quimica y and REX American 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 REX American Resources are associated (or correlated) with Sociedad Quimica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sociedad Quimica y has no effect on the direction of REX American i.e., REX American and Sociedad Quimica go up and down completely randomly.
Pair Corralation between REX American and Sociedad Quimica
Considering the 90-day investment horizon REX American Resources is expected to under-perform the Sociedad Quimica. In addition to that, REX American is 1.01 times more volatile than Sociedad Quimica y. It trades about -0.06 of its total potential returns per unit of risk. Sociedad Quimica y is currently generating about 0.0 per unit of volatility. If you would invest 3,868 in Sociedad Quimica y on August 31, 2024 and sell it today you would lose (12.00) from holding Sociedad Quimica y or give up 0.31% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
REX American Resources vs. Sociedad Quimica y
Performance |
| Timeline |
| REX American Resources |
| Sociedad Quimica y |
REX American and Sociedad Quimica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with REX American and Sociedad Quimica
The main advantage of trading using opposite REX American and Sociedad Quimica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if REX American position performs unexpectedly, Sociedad Quimica 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 Sociedad Quimica will offset losses from the drop in Sociedad Quimica's long position.| REX American vs. Innospec | REX American vs. H B Fuller | REX American vs. Quaker Chemical | REX American vs. Minerals Technologies |
| Sociedad Quimica vs. Linde plc Ordinary | Sociedad Quimica vs. Air Products and | Sociedad Quimica vs. Sherwin Williams Co | Sociedad Quimica vs. Albemarle Corp |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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