Correlation Between Step One and Reece
Can any of the company-specific risk be diversified away by investing in both Step One and Reece 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 Step One and Reece into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Step One Clothing and Reece, you can compare the effects of market volatilities on Step One and Reece 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 Step One with a short position of Reece. Check out your portfolio center. Please also check ongoing floating volatility patterns of Step One and Reece.
Diversification Opportunities for Step One and Reece
Very poor diversification
The 3 months correlation between Step and Reece is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Step One Clothing and Reece in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reece and Step One 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 Step One Clothing are associated (or correlated) with Reece. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reece has no effect on the direction of Step One i.e., Step One and Reece go up and down completely randomly.
Pair Corralation between Step One and Reece
Assuming the 90 days trading horizon Step One Clothing is expected to generate 2.43 times more return on investment than Reece. However, Step One is 2.43 times more volatile than Reece. It trades about 0.12 of its potential returns per unit of risk. Reece is currently generating about 0.04 per unit of risk. If you would invest 34.00 in Step One Clothing on September 12, 2024 and sell it today you would earn a total of 105.00 from holding Step One Clothing or generate 308.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Step One Clothing vs. Reece
Performance |
| Timeline |
| Step One Clothing |
| Reece |
Step One and Reece Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Step One and Reece
The main advantage of trading using opposite Step One and Reece positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Step One position performs unexpectedly, Reece 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 Reece will offset losses from the drop in Reece's long position.| Step One vs. Aneka Tambang Tbk | Step One vs. BHP Group Limited | Step One vs. Commonwealth Bank | Step One vs. Commonwealth Bank of |
| Reece vs. Step One Clothing | Reece vs. EVE Health Group | Reece vs. Treasury Wine Estates | Reece vs. Saferoads Holdings |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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