Correlation Between Tetragon Financial and Reinet Investments
Can any of the company-specific risk be diversified away by investing in both Tetragon Financial and Reinet Investments 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 Tetragon Financial and Reinet Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tetragon Financial Group and Reinet Investments SCA, you can compare the effects of market volatilities on Tetragon Financial and Reinet Investments 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 Tetragon Financial with a short position of Reinet Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tetragon Financial and Reinet Investments.
Diversification Opportunities for Tetragon Financial and Reinet Investments
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tetragon and Reinet is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Tetragon Financial Group and Reinet Investments SCA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reinet Investments SCA and Tetragon Financial 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 Tetragon Financial Group are associated (or correlated) with Reinet Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reinet Investments SCA has no effect on the direction of Tetragon Financial i.e., Tetragon Financial and Reinet Investments go up and down completely randomly.
Pair Corralation between Tetragon Financial and Reinet Investments
Assuming the 90 days trading horizon Tetragon Financial is expected to generate 1.32 times less return on investment than Reinet Investments. But when comparing it to its historical volatility, Tetragon Financial Group is 2.26 times less risky than Reinet Investments. It trades about 0.06 of its potential returns per unit of risk. Reinet Investments SCA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,980 in Reinet Investments SCA on August 27, 2024 and sell it today you would earn a total of 580.00 from holding Reinet Investments SCA or generate 29.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 96.3% |
| Values | Daily Returns |
Tetragon Financial Group vs. Reinet Investments SCA
Performance |
| Timeline |
| Tetragon Financial |
| Reinet Investments SCA |
Tetragon Financial and Reinet Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tetragon Financial and Reinet Investments
The main advantage of trading using opposite Tetragon Financial and Reinet Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tetragon Financial position performs unexpectedly, Reinet Investments 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 Reinet Investments will offset losses from the drop in Reinet Investments' long position.The idea behind Tetragon Financial Group and Reinet Investments SCA 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.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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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