Correlation Between Real Heart and Dometic Group

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

By analyzing existing cross correlation between Real Heart and Dometic Group AB, you can compare the effects of market volatilities on Real Heart and Dometic Group 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 Real Heart with a short position of Dometic Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Real Heart and Dometic Group.

Diversification Opportunities for Real Heart and Dometic Group

0.68

Correlation Coefficient

Real Heart  Dometic Group

Poor diversification

The 3 months correlation between Real and Dometic is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Real Heart and Dometic Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dometic Group AB and Real Heart 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 Real Heart are associated (or correlated) with Dometic Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dometic Group AB has no effect on the direction of Real Heart i.e., Real Heart and Dometic Group go up and down completely randomly.

Pair Corralation between Real Heart and Dometic Group

Assuming the 90 days trading horizon Real Heart is expected to under-perform the Dometic Group. In addition to that, Real Heart is 1.75 times more volatile than Dometic Group AB. It trades about -0.26 of its total potential returns per unit of risk. Dometic Group AB is currently generating about -0.03 per unit of volatility. If you would invest  5,750  in Dometic Group AB on September 4, 2024 and sell it today you would lose (125.00) from holding Dometic Group AB or give up 2.17% of portfolio value over 90 days.

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

Real Heart  vs.  Dometic Group AB

Real Heart

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Real Heart has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Dometic Group AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dometic Group AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's primary indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Real Heart and Dometic Group

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

The idea behind Real Heart and Dometic Group AB 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.