Correlation Between River Tech and Morrow Bank

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

By analyzing existing cross correlation between River Tech plc and Morrow Bank ASA, you can compare the effects of market volatilities on River Tech and Morrow Bank 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 River Tech with a short position of Morrow Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of River Tech and Morrow Bank.

Diversification Opportunities for River Tech and Morrow Bank

-0.59

Correlation Coefficient

River Tech  Morrow Bank

Excellent diversification

The 3 months correlation between River and Morrow is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding River Tech plc and Morrow Bank ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morrow Bank ASA and River Tech 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 River Tech plc are associated (or correlated) with Morrow Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morrow Bank ASA has no effect on the direction of River Tech i.e., River Tech and Morrow Bank go up and down completely randomly.

Pair Corralation between River Tech and Morrow Bank

Assuming the 90 days trading horizon River Tech plc is expected to under-perform the Morrow Bank. In addition to that, River Tech is 2.86 times more volatile than Morrow Bank ASA. It trades about -0.05 of its total potential returns per unit of risk. Morrow Bank ASA is currently generating about 0.3 per unit of volatility. If you would invest  614.00  in Morrow Bank ASA on September 13, 2024 and sell it today you would earn a total of  298.00  from holding Morrow Bank ASA or generate 48.53% return on investment over 90 days.

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

River Tech plc  vs.  Morrow Bank ASA

River Tech plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days River Tech plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Morrow Bank ASA

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Morrow Bank ASA are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Morrow Bank disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with River Tech and Morrow Bank

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

The idea behind River Tech plc and Morrow Bank ASA 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.