Correlation Between Reinet Investments and RMB Holdings

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

By analyzing existing cross correlation between Reinet Investments SCA and RMB Holdings, you can compare the effects of market volatilities on Reinet Investments and RMB Holdings 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 Reinet Investments with a short position of RMB Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reinet Investments and RMB Holdings.

Diversification Opportunities for Reinet Investments and RMB Holdings

0.05

Correlation Coefficient

Reinet Investments  RMB Holdings

Significant diversification

The 3 months correlation between Reinet and RMB is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Reinet Investments SCA and RMB Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RMB Holdings and Reinet Investments 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 Reinet Investments SCA are associated (or correlated) with RMB Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RMB Holdings has no effect on the direction of Reinet Investments i.e., Reinet Investments and RMB Holdings go up and down completely randomly.

Pair Corralation between Reinet Investments and RMB Holdings

Assuming the 90 days trading horizon Reinet Investments SCA is expected to under-perform the RMB Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Reinet Investments SCA is 1.64 times less risky than RMB Holdings. The stock trades about -0.01 of its potential returns per unit of risk. The RMB Holdings is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  3,900  in RMB Holdings on September 16, 2024 and sell it today you would earn a total of  600.00  from holding RMB Holdings or generate 15.38% return on investment over 90 days.

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

Reinet Investments SCA  vs.  RMB Holdings

Reinet Investments SCA

Risk-Adjusted Performance

0 of 100

Very Weak

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

RMB Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RMB Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, RMB Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Reinet Investments and RMB Holdings

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

The idea behind Reinet Investments SCA and RMB Holdings 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.