Correlation Between River Tech and Waste Plastic

Can any of the company-specific risk be diversified away by investing in both River Tech and Waste Plastic 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 Waste Plastic 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 Waste Plastic Upcycling, you can compare the effects of market volatilities on River Tech and Waste Plastic 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 Waste Plastic. Check out your portfolio center. Please also check ongoing floating volatility patterns of River Tech and Waste Plastic.

Diversification Opportunities for River Tech and Waste Plastic

0.73

Correlation Coefficient

River Tech  Waste Plastic

Poor diversification

The 3 months correlation between River and Waste is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding River Tech plc and Waste Plastic Upcycling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Plastic Upcycling 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 Waste Plastic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waste Plastic Upcycling has no effect on the direction of River Tech i.e., River Tech and Waste Plastic go up and down completely randomly.

Pair Corralation between River Tech and Waste Plastic

Assuming the 90 days trading horizon River Tech plc is expected to generate 2.49 times more return on investment than Waste Plastic. However, River Tech is 2.49 times more volatile than Waste Plastic Upcycling. It trades about 0.11 of its potential returns per unit of risk. Waste Plastic Upcycling is currently generating about -0.28 per unit of risk. If you would invest  1,820  in River Tech plc on September 5, 2024 and sell it today you would earn a total of  260.00  from holding River Tech plc or generate 14.29% return on investment over 90 days.

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

River Tech plc  vs.  Waste Plastic Upcycling

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 very healthy basic indicators, River Tech is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Waste Plastic Upcycling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Waste Plastic Upcycling 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 basic indicators 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 River Tech and Waste Plastic

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

The idea behind River Tech plc and Waste Plastic Upcycling 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.