Correlation Between RSR and Synthetix

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

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

Diversification Opportunities for RSR and Synthetix

0.9

Correlation Coefficient

RSR  Synthetix

Almost no diversification

The 3 months correlation between RSR and Synthetix is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding RSR and Synthetix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synthetix and RSR 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 RSR are associated (or correlated) with Synthetix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Synthetix has no effect on the direction of RSR i.e., RSR and Synthetix go up and down completely randomly.

Pair Corralation between RSR and Synthetix

Assuming the 90 days trading horizon RSR is expected to generate 1.01 times less return on investment than Synthetix. In addition to that, RSR is 1.12 times more volatile than Synthetix. It trades about 0.21 of its total potential returns per unit of risk. Synthetix is currently generating about 0.24 per unit of volatility. If you would invest  128.00  in Synthetix on September 2, 2024 and sell it today you would earn a total of  135.00  from holding Synthetix or generate 105.47% return on investment over 90 days.

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

RSR  vs.  Synthetix

RSR

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in RSR are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, RSR exhibited solid returns over the last few months and may actually be approaching a breakup point.

Synthetix

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Synthetix are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Synthetix exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with RSR and Synthetix

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

The idea behind RSR and Synthetix 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.