Correlation Between RF Materials and Leaders Technology
Can any of the company-specific risk be diversified away by investing in both RF Materials and Leaders Technology 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 RF Materials and Leaders Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RF Materials Co and Leaders Technology Investment, you can compare the effects of market volatilities on RF Materials and Leaders Technology 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 RF Materials with a short position of Leaders Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of RF Materials and Leaders Technology.
Diversification Opportunities for RF Materials and Leaders Technology
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between 327260 and Leaders is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding RF Materials Co and Leaders Technology Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leaders Technology and RF Materials 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 RF Materials Co are associated (or correlated) with Leaders Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leaders Technology has no effect on the direction of RF Materials i.e., RF Materials and Leaders Technology go up and down completely randomly.
Pair Corralation between RF Materials and Leaders Technology
Assuming the 90 days trading horizon RF Materials Co is expected to generate 0.58 times more return on investment than Leaders Technology. However, RF Materials Co is 1.73 times less risky than Leaders Technology. It trades about -0.05 of its potential returns per unit of risk. Leaders Technology Investment is currently generating about -0.04 per unit of risk. If you would invest 1,327,382 in RF Materials Co on October 11, 2024 and sell it today you would lose (813,382) from holding RF Materials Co or give up 61.28% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 97.09% |
| Values | Daily Returns |
RF Materials Co vs. Leaders Technology Investment
Performance |
| Timeline |
| RF Materials |
| Leaders Technology |
RF Materials and Leaders Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RF Materials and Leaders Technology
The main advantage of trading using opposite RF Materials and Leaders Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RF Materials position performs unexpectedly, Leaders Technology 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 Leaders Technology will offset losses from the drop in Leaders Technology's long position.| RF Materials vs. Shinil Industrial Co | RF Materials vs. Daesung Industrial Co | RF Materials vs. iNtRON Biotechnology | RF Materials vs. Drb Industrial |
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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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