Correlation Between River Tech and Okea ASA
Can any of the company-specific risk be diversified away by investing in both River Tech and Okea ASA 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 River Tech and Okea ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between River Tech plc and Okea ASA, you can compare the effects of market volatilities on River Tech and Okea ASA 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 River Tech with a short position of Okea ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of River Tech and Okea ASA.
Diversification Opportunities for River Tech and Okea ASA
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between River and Okea is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding River Tech plc and Okea ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Okea ASA and River Tech 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 River Tech plc are associated (or correlated) with Okea ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Okea ASA has no effect on the direction of River Tech i.e., River Tech and Okea ASA go up and down completely randomly.
Pair Corralation between River Tech and Okea ASA
Assuming the 90 days trading horizon River Tech plc is expected to under-perform the Okea ASA. In addition to that, River Tech is 2.12 times more volatile than Okea ASA. It trades about -0.03 of its total potential returns per unit of risk. Okea ASA is currently generating about -0.04 per unit of volatility. If you would invest 3,037 in Okea ASA on September 4, 2024 and sell it today you would lose (1,047) from holding Okea ASA or give up 34.47% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
River Tech plc vs. Okea ASA
Performance |
| Timeline |
| River Tech plc |
| Okea ASA |
River Tech and Okea ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with River Tech and Okea ASA
The main advantage of trading using opposite River Tech and Okea ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if River Tech position performs unexpectedly, Okea ASA 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 Okea ASA will offset losses from the drop in Okea ASA's long position.| River Tech vs. Huddlestock Fintech As | River Tech vs. Xplora Technologies As | River Tech vs. Ocean Sun As | River Tech vs. Polight ASA |
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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