Correlation Between USWE SPORTS and RLX TECH

Can any of the company-specific risk be diversified away by investing in both USWE SPORTS and RLX TECH 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 USWE SPORTS and RLX TECH into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between USWE SPORTS AB and RLX TECH SPADR1, you can compare the effects of market volatilities on USWE SPORTS and RLX TECH 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 USWE SPORTS with a short position of RLX TECH. Check out your portfolio center. Please also check ongoing floating volatility patterns of USWE SPORTS and RLX TECH.

Diversification Opportunities for USWE SPORTS and RLX TECH

0.5

Correlation Coefficient

USWE SPORTS  RLX TECH

Very weak diversification

The 3 months correlation between USWE and RLX is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding USWE SPORTS AB and RLX TECH SPADR1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RLX TECH SPADR1 and USWE SPORTS 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 USWE SPORTS AB are associated (or correlated) with RLX TECH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RLX TECH SPADR1 has no effect on the direction of USWE SPORTS i.e., USWE SPORTS and RLX TECH go up and down completely randomly.

Pair Corralation between USWE SPORTS and RLX TECH

Assuming the 90 days horizon USWE SPORTS AB is expected to under-perform the RLX TECH. In addition to that, USWE SPORTS is 1.26 times more volatile than RLX TECH SPADR1. It trades about -0.07 of its total potential returns per unit of risk. RLX TECH SPADR1 is currently generating about 0.01 per unit of volatility. If you would invest  186.00  in RLX TECH SPADR1 on September 5, 2024 and sell it today you would lose (10.00) from holding RLX TECH SPADR1 or give up 5.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.6%
Values	Daily Returns

USWE SPORTS AB  vs.  RLX TECH SPADR1

USWE SPORTS AB

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in USWE SPORTS AB are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, USWE SPORTS reported solid returns over the last few months and may actually be approaching a breakup point.

RLX TECH SPADR1

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RLX TECH SPADR1 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, RLX TECH reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with USWE SPORTS and RLX TECH

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

The idea behind USWE SPORTS AB and RLX TECH SPADR1 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 Transaction History module to view history of all your transactions and understand their impact on performance.