Correlation Between Ratch Group and Energy Absolute

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

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

Diversification Opportunities for Ratch Group and Energy Absolute

0.64

Correlation Coefficient

Ratch Group  Energy Absolute

Poor diversification

The 3 months correlation between Ratch and Energy is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Ratch Group Public and Energy Absolute Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Absolute Public and Ratch 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 Ratch Group Public are associated (or correlated) with Energy Absolute. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Absolute Public has no effect on the direction of Ratch Group i.e., Ratch Group and Energy Absolute go up and down completely randomly.

Pair Corralation between Ratch Group and Energy Absolute

Assuming the 90 days trading horizon Ratch Group Public is expected to generate 0.29 times more return on investment than Energy Absolute. However, Ratch Group Public is 3.4 times less risky than Energy Absolute. It trades about -0.08 of its potential returns per unit of risk. Energy Absolute Public is currently generating about -0.12 per unit of risk. If you would invest  3,250  in Ratch Group Public on September 26, 2024 and sell it today you would lose (225.00) from holding Ratch Group Public or give up 6.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Ratch Group Public  vs.  Energy Absolute Public

Ratch Group Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ratch Group Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Energy Absolute Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Energy Absolute Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Ratch Group and Energy Absolute

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

The idea behind Ratch Group Public and Energy Absolute Public 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.

Check out your portfolio center.

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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..