Correlation Between Boyd Group and Ritchie Bros

Can any of the company-specific risk be diversified away by investing in both Boyd Group and Ritchie Bros 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 Boyd Group and Ritchie Bros into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Boyd Group Services and Ritchie Bros Auctioneers, you can compare the effects of market volatilities on Boyd Group and Ritchie Bros 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 Boyd Group with a short position of Ritchie Bros. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boyd Group and Ritchie Bros.

Diversification Opportunities for Boyd Group and Ritchie Bros

0.37

Correlation Coefficient

Boyd Group  Ritchie Bros

Weak diversification

The 3 months correlation between Boyd and Ritchie is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Boyd Group Services and Ritchie Bros Auctioneers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ritchie Bros Auctioneers and Boyd Group 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 Boyd Group Services are associated (or correlated) with Ritchie Bros. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ritchie Bros Auctioneers has no effect on the direction of Boyd Group i.e., Boyd Group and Ritchie Bros go up and down completely randomly.

Pair Corralation between Boyd Group and Ritchie Bros

Assuming the 90 days trading horizon Boyd Group is expected to generate 2.57 times less return on investment than Ritchie Bros. But when comparing it to its historical volatility, Boyd Group Services is 1.18 times less risky than Ritchie Bros. It trades about 0.07 of its potential returns per unit of risk. Ritchie Bros Auctioneers is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  11,369  in Ritchie Bros Auctioneers on September 21, 2024 and sell it today you would earn a total of  1,637  from holding Ritchie Bros Auctioneers or generate 14.4% return on investment over 90 days.

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

Boyd Group Services  vs.  Ritchie Bros Auctioneers

Boyd Group Services

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Boyd Group Services are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Boyd Group is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Ritchie Bros Auctioneers

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ritchie Bros Auctioneers are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Ritchie Bros displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Boyd Group and Ritchie Bros

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

The idea behind Boyd Group Services and Ritchie Bros Auctioneers 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.