Correlation Between Impax Environmental and River

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

By analyzing existing cross correlation between Impax Environmental Markets and River and Mercantile, you can compare the effects of market volatilities on Impax Environmental and River 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 Impax Environmental with a short position of River. Check out your portfolio center. Please also check ongoing floating volatility patterns of Impax Environmental and River.

Diversification Opportunities for Impax Environmental and River

-0.63

Correlation Coefficient

Impax Environmental  River

Excellent diversification

The 3 months correlation between Impax and River is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Impax Environmental Markets and River and Mercantile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on River and Mercantile and Impax Environmental 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 Impax Environmental Markets are associated (or correlated) with River. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of River and Mercantile has no effect on the direction of Impax Environmental i.e., Impax Environmental and River go up and down completely randomly.

Pair Corralation between Impax Environmental and River

Assuming the 90 days trading horizon Impax Environmental Markets is expected to under-perform the River. But the stock apears to be less risky and, when comparing its historical volatility, Impax Environmental Markets is 1.7 times less risky than River. The stock trades about -0.31 of its potential returns per unit of risk. The River and Mercantile is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  17,500  in River and Mercantile on September 12, 2024 and sell it today you would earn a total of  250.00  from holding River and Mercantile or generate 1.43% return on investment over 90 days.

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

Impax Environmental Markets  vs.  River and Mercantile

Impax Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

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

River and Mercantile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days River and Mercantile has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, River is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Impax Environmental and River

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

The idea behind Impax Environmental Markets and River and Mercantile 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.