Correlation Between 5Th Planet and REC Silicon

Can any of the company-specific risk be diversified away by investing in both 5Th Planet and REC Silicon 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 5Th Planet and REC Silicon into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 5Th Planet Games and REC Silicon ASA, you can compare the effects of market volatilities on 5Th Planet and REC Silicon 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 5Th Planet with a short position of REC Silicon. Check out your portfolio center. Please also check ongoing floating volatility patterns of 5Th Planet and REC Silicon.

Diversification Opportunities for 5Th Planet and REC Silicon

0.19

Correlation Coefficient

5Th Planet  REC Silicon

Average diversification

The 3 months correlation between 5Th and REC is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding 5Th Planet Games and REC Silicon ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REC Silicon ASA and 5Th Planet 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 5Th Planet Games are associated (or correlated) with REC Silicon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REC Silicon ASA has no effect on the direction of 5Th Planet i.e., 5Th Planet and REC Silicon go up and down completely randomly.

Pair Corralation between 5Th Planet and REC Silicon

Assuming the 90 days trading horizon 5Th Planet Games is expected to under-perform the REC Silicon. But the stock apears to be less risky and, when comparing its historical volatility, 5Th Planet Games is 2.39 times less risky than REC Silicon. The stock trades about -0.09 of its potential returns per unit of risk. The REC Silicon ASA is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  825.00  in REC Silicon ASA on September 16, 2024 and sell it today you would lose (198.00) from holding REC Silicon ASA or give up 24.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

5Th Planet Games  vs.  REC Silicon ASA

5Th Planet Games

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 5Th Planet Games has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

REC Silicon ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days REC Silicon ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, REC Silicon is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with 5Th Planet and REC Silicon

The main advantage of trading using opposite 5Th Planet and REC Silicon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 5Th Planet position performs unexpectedly, REC Silicon 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 REC Silicon will offset losses from the drop in REC Silicon's long position.

The idea behind 5Th Planet Games and REC Silicon ASA 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.

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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.