Correlation Between Formetal and Raontech
Can any of the company-specific risk be diversified away by investing in both Formetal and Raontech 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 Formetal and Raontech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Formetal Co and Raontech, you can compare the effects of market volatilities on Formetal and Raontech 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 Formetal with a short position of Raontech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formetal and Raontech.
Diversification Opportunities for Formetal and Raontech
Weak diversification
The 3 months correlation between Formetal and Raontech is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Formetal Co and Raontech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raontech and Formetal 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 Formetal Co are associated (or correlated) with Raontech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raontech has no effect on the direction of Formetal i.e., Formetal and Raontech go up and down completely randomly.
Pair Corralation between Formetal and Raontech
Assuming the 90 days trading horizon Formetal is expected to generate 4.62 times less return on investment than Raontech. In addition to that, Formetal is 1.02 times more volatile than Raontech. It trades about 0.09 of its total potential returns per unit of risk. Raontech is currently generating about 0.43 per unit of volatility. If you would invest 277,500 in Raontech on October 13, 2024 and sell it today you would earn a total of 110,000 from holding Raontech or generate 39.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Formetal Co vs. Raontech
Performance |
| Timeline |
| Formetal |
| Raontech |
Formetal and Raontech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Formetal and Raontech
The main advantage of trading using opposite Formetal and Raontech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formetal position performs unexpectedly, Raontech 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 Raontech will offset losses from the drop in Raontech's long position.| Formetal vs. Cloud Air CoLtd | Formetal vs. Jeju Air Co | Formetal vs. SM Entertainment Co | Formetal vs. Tway Air Co |
| Raontech vs. Formetal Co | Raontech vs. Hyundai Industrial Co | Raontech vs. Songwon Industrial Co | Raontech vs. Seoul Electronics Telecom |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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