Correlation Between Rio2 and Bemax

Can any of the company-specific risk be diversified away by investing in both Rio2 and Bemax 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 Rio2 and Bemax into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Rio2 and Bemax Inc, you can compare the effects of market volatilities on Rio2 and Bemax 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 Rio2 with a short position of Bemax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rio2 and Bemax.

Diversification Opportunities for Rio2 and Bemax

-0.12

Correlation Coefficient

Rio2  Bemax

Good diversification

The 3 months correlation between Rio2 and Bemax is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Rio2 and Bemax Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bemax Inc and Rio2 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 Rio2 are associated (or correlated) with Bemax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bemax Inc has no effect on the direction of Rio2 i.e., Rio2 and Bemax go up and down completely randomly.

Pair Corralation between Rio2 and Bemax

Assuming the 90 days trading horizon Rio2 is expected to generate 4.88 times less return on investment than Bemax. But when comparing it to its historical volatility, Rio2 is 6.03 times less risky than Bemax. It trades about 0.14 of its potential returns per unit of risk. Bemax Inc is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  8.00  in Bemax Inc on August 25, 2025 and sell it today you would earn a total of  2.00  from holding Bemax Inc or generate 25.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Rio2  vs.  Bemax Inc

Rio2

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Rio2 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Rio2 displayed solid returns over the last few months and may actually be approaching a breakup point.

Bemax Inc

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Bemax Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Bemax exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rio2 and Bemax

The main advantage of trading using opposite Rio2 and Bemax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rio2 position performs unexpectedly, Bemax 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 Bemax will offset losses from the drop in Bemax's long position.

The idea behind Rio2 and Bemax Inc 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.