Correlation Between Ricoh and PAX Global
Can any of the company-specific risk be diversified away by investing in both Ricoh and PAX Global 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 Ricoh and PAX Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ricoh Company and PAX Global Technology, you can compare the effects of market volatilities on Ricoh and PAX Global 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 Ricoh with a short position of PAX Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ricoh and PAX Global.
Diversification Opportunities for Ricoh and PAX Global
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ricoh and PAX is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Ricoh Company and PAX Global Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PAX Global Technology and Ricoh 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 Ricoh Company are associated (or correlated) with PAX Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PAX Global Technology has no effect on the direction of Ricoh i.e., Ricoh and PAX Global go up and down completely randomly.
Pair Corralation between Ricoh and PAX Global
Assuming the 90 days trading horizon Ricoh is expected to generate 2.52 times less return on investment than PAX Global. But when comparing it to its historical volatility, Ricoh Company is 2.85 times less risky than PAX Global. It trades about 0.14 of its potential returns per unit of risk. PAX Global Technology is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 55.00 in PAX Global Technology on September 1, 2024 and sell it today you would earn a total of 8.00 from holding PAX Global Technology or generate 14.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Ricoh Company vs. PAX Global Technology
Performance |
| Timeline |
| Ricoh Company |
| PAX Global Technology |
Ricoh and PAX Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ricoh and PAX Global
The main advantage of trading using opposite Ricoh and PAX Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ricoh position performs unexpectedly, PAX Global 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 PAX Global will offset losses from the drop in PAX Global's long position.The idea behind Ricoh Company and PAX Global Technology 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.| PAX Global vs. Canon Inc | PAX Global vs. Ricoh Company | PAX Global vs. Herman Miller | PAX Global vs. HNI Corporation |
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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