Correlation Between River Tech and TGS NOPEC

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

Diversification Opportunities for River Tech and TGS NOPEC

-0.74

Correlation Coefficient

River Tech  TGS NOPEC

Pay attention - limited upside

The 3 months correlation between River and TGS is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding River Tech plc and TGS NOPEC Geophysical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TGS NOPEC Geophysical 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 TGS NOPEC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TGS NOPEC Geophysical has no effect on the direction of River Tech i.e., River Tech and TGS NOPEC go up and down completely randomly.

Pair Corralation between River Tech and TGS NOPEC

Assuming the 90 days trading horizon River Tech is expected to generate 3.14 times less return on investment than TGS NOPEC. In addition to that, River Tech is 2.16 times more volatile than TGS NOPEC Geophysical. It trades about 0.03 of its total potential returns per unit of risk. TGS NOPEC Geophysical is currently generating about 0.19 per unit of volatility. If you would invest  9,831  in TGS NOPEC Geophysical on February 26, 2024 and sell it today you would earn a total of  2,659  from holding TGS NOPEC Geophysical or generate 27.05% return on investment over 90 days.

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

River Tech plc  vs.  TGS NOPEC Geophysical

River Tech plc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in River Tech plc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, River Tech may actually be approaching a critical reversion point that can send shares even higher in June 2024.

TGS NOPEC Geophysical

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TGS NOPEC Geophysical are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, TGS NOPEC disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with River Tech and TGS NOPEC

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

The idea behind River Tech plc and TGS NOPEC Geophysical 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.