Correlation Between Reckitt Benckiser and Tribe Technology

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

By analyzing existing cross correlation between Reckitt Benckiser Group and Tribe Technology PLC, you can compare the effects of market volatilities on Reckitt Benckiser and Tribe Technology 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 Reckitt Benckiser with a short position of Tribe Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reckitt Benckiser and Tribe Technology.

Diversification Opportunities for Reckitt Benckiser and Tribe Technology

-0.77

Correlation Coefficient

Reckitt Benckiser  Tribe Technology

Pay attention - limited upside

The 3 months correlation between Reckitt and Tribe is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Reckitt Benckiser Group and Tribe Technology PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tribe Technology PLC and Reckitt Benckiser 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 Reckitt Benckiser Group are associated (or correlated) with Tribe Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tribe Technology PLC has no effect on the direction of Reckitt Benckiser i.e., Reckitt Benckiser and Tribe Technology go up and down completely randomly.

Pair Corralation between Reckitt Benckiser and Tribe Technology

Assuming the 90 days trading horizon Reckitt Benckiser Group is expected to generate 0.32 times more return on investment than Tribe Technology. However, Reckitt Benckiser Group is 3.11 times less risky than Tribe Technology. It trades about 0.09 of its potential returns per unit of risk. Tribe Technology PLC is currently generating about -0.33 per unit of risk. If you would invest  448,000  in Reckitt Benckiser Group on September 4, 2024 and sell it today you would earn a total of  34,100  from holding Reckitt Benckiser Group or generate 7.61% return on investment over 90 days.

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

Reckitt Benckiser Group  vs.  Tribe Technology PLC

Reckitt Benckiser

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Reckitt Benckiser Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Reckitt Benckiser may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Tribe Technology PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tribe Technology PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Reckitt Benckiser and Tribe Technology

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

The idea behind Reckitt Benckiser Group and Tribe Technology PLC 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.