Correlation Between LS Materials and RFTech
Can any of the company-specific risk be diversified away by investing in both LS Materials and RFTech 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 LS Materials and RFTech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LS Materials and RFTech Co, you can compare the effects of market volatilities on LS Materials and RFTech 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 LS Materials with a short position of RFTech. Check out your portfolio center. Please also check ongoing floating volatility patterns of LS Materials and RFTech.
Diversification Opportunities for LS Materials and RFTech
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between 417200 and RFTech is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding LS Materials and RFTech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RFTech and LS 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 LS Materials are associated (or correlated) with RFTech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RFTech has no effect on the direction of LS Materials i.e., LS Materials and RFTech go up and down completely randomly.
Pair Corralation between LS Materials and RFTech
Assuming the 90 days trading horizon LS Materials is expected to under-perform the RFTech. In addition to that, LS Materials is 1.61 times more volatile than RFTech Co. It trades about -0.19 of its total potential returns per unit of risk. RFTech Co is currently generating about -0.05 per unit of volatility. If you would invest 397,500 in RFTech Co on September 3, 2024 and sell it today you would lose (54,500) from holding RFTech Co or give up 13.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LS Materials vs. RFTech Co
Performance |
| Timeline |
| LS Materials |
| RFTech |
LS Materials and RFTech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LS Materials and RFTech
The main advantage of trading using opposite LS Materials and RFTech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LS Materials position performs unexpectedly, RFTech 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 RFTech will offset losses from the drop in RFTech's long position.| LS Materials vs. Samsung Electronics Co | LS Materials vs. Samsung Electronics Co | LS Materials vs. LG Energy Solution | LS Materials vs. SK Hynix |
| RFTech vs. Lake Materials Co | RFTech vs. LS Materials | RFTech vs. Hana Materials | RFTech vs. Infinitt Healthcare Co |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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