Correlation Between Aiforia Technologies and Reka Industrial

Can any of the company-specific risk be diversified away by investing in both Aiforia Technologies and Reka Industrial 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 Aiforia Technologies and Reka Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aiforia Technologies Oyj and Reka Industrial Oyj, you can compare the effects of market volatilities on Aiforia Technologies and Reka Industrial 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 Aiforia Technologies with a short position of Reka Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aiforia Technologies and Reka Industrial.

Diversification Opportunities for Aiforia Technologies and Reka Industrial

0.44

Correlation Coefficient

Aiforia Technologies  Reka Industrial

Very weak diversification

The 3 months correlation between Aiforia and Reka is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Aiforia Technologies Oyj and Reka Industrial Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reka Industrial Oyj and Aiforia Technologies 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 Aiforia Technologies Oyj are associated (or correlated) with Reka Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reka Industrial Oyj has no effect on the direction of Aiforia Technologies i.e., Aiforia Technologies and Reka Industrial go up and down completely randomly.

Pair Corralation between Aiforia Technologies and Reka Industrial

Assuming the 90 days trading horizon Aiforia Technologies Oyj is expected to under-perform the Reka Industrial. But the stock apears to be less risky and, when comparing its historical volatility, Aiforia Technologies Oyj is 1.11 times less risky than Reka Industrial. The stock trades about -0.06 of its potential returns per unit of risk. The Reka Industrial Oyj is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  469.00  in Reka Industrial Oyj on September 16, 2024 and sell it today you would lose (2.00) from holding Reka Industrial Oyj or give up 0.43% of portfolio value over 90 days.

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

Aiforia Technologies Oyj  vs.  Reka Industrial Oyj

Aiforia Technologies Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aiforia Technologies Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Reka Industrial Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reka Industrial Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Reka Industrial is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Aiforia Technologies and Reka Industrial

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

The idea behind Aiforia Technologies Oyj and Reka Industrial Oyj 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.