Correlation Between HKFoods Oyj and Reka Industrial

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

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

Diversification Opportunities for HKFoods Oyj and Reka Industrial

-0.48

Correlation Coefficient

HKFoods Oyj  Reka Industrial

Very good diversification

The 3 months correlation between HKFoods and Reka is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding HKFoods Oyj A 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 HKFoods Oyj 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 HKFoods Oyj A 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 HKFoods Oyj i.e., HKFoods Oyj and Reka Industrial go up and down completely randomly.

Pair Corralation between HKFoods Oyj and Reka Industrial

Assuming the 90 days trading horizon HKFoods Oyj A is expected to generate 1.85 times more return on investment than Reka Industrial. However, HKFoods Oyj is 1.85 times more volatile than Reka Industrial Oyj. It trades about 0.13 of its potential returns per unit of risk. Reka Industrial Oyj is currently generating about -0.07 per unit of risk. If you would invest  61.00  in HKFoods Oyj A on September 17, 2024 and sell it today you would earn a total of  18.00  from holding HKFoods Oyj A or generate 29.51% return on investment over 90 days.

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

HKFoods Oyj A  vs.  Reka Industrial Oyj

HKFoods Oyj A

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HKFoods Oyj A are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, HKFoods Oyj unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 latest weak performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with HKFoods Oyj and Reka Industrial

The main advantage of trading using opposite HKFoods Oyj and Reka Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HKFoods Oyj 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 HKFoods Oyj A 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.