Correlation Between River and Henkel AG
Can any of the company-specific risk be diversified away by investing in both River and Henkel AG 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 and Henkel AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between River and Mercantile and Henkel AG Co, you can compare the effects of market volatilities on River and Henkel AG 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 with a short position of Henkel AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of River and Henkel AG.
Diversification Opportunities for River and Henkel AG
Excellent diversification
The 3 months correlation between River and Henkel is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding River and Mercantile and Henkel AG Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Henkel AG and River 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 and Mercantile are associated (or correlated) with Henkel AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Henkel AG has no effect on the direction of River i.e., River and Henkel AG go up and down completely randomly.
Pair Corralation between River and Henkel AG
Assuming the 90 days trading horizon River and Mercantile is expected to under-perform the Henkel AG. But the stock apears to be less risky and, when comparing its historical volatility, River and Mercantile is 1.32 times less risky than Henkel AG. The stock trades about -0.06 of its potential returns per unit of risk. The Henkel AG Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 7,383 in Henkel AG Co on October 24, 2024 and sell it today you would earn a total of 13.00 from holding Henkel AG Co or generate 0.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
River and Mercantile vs. Henkel AG Co
Performance |
| Timeline |
| River and Mercantile |
| Henkel AG |
River and Henkel AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with River and Henkel AG
The main advantage of trading using opposite River and Henkel AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if River position performs unexpectedly, Henkel AG 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 Henkel AG will offset losses from the drop in Henkel AG's long position.| River vs. Edita Food Industries | River vs. Veolia Environnement VE | River vs. Hilton Food Group | River vs. Premier Foods PLC |
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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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