Correlation Between Trade Van and Rafael Microelectronics
Can any of the company-specific risk be diversified away by investing in both Trade Van and Rafael Microelectronics 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 Trade Van and Rafael Microelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Trade Van Information Services and Rafael Microelectronics, you can compare the effects of market volatilities on Trade Van and Rafael Microelectronics 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 Trade Van with a short position of Rafael Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trade Van and Rafael Microelectronics.
Diversification Opportunities for Trade Van and Rafael Microelectronics
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Trade and Rafael is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Trade Van Information Services and Rafael Microelectronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rafael Microelectronics and Trade Van 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 Trade Van Information Services are associated (or correlated) with Rafael Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rafael Microelectronics has no effect on the direction of Trade Van i.e., Trade Van and Rafael Microelectronics go up and down completely randomly.
Pair Corralation between Trade Van and Rafael Microelectronics
Assuming the 90 days trading horizon Trade Van is expected to generate 1.41 times less return on investment than Rafael Microelectronics. But when comparing it to its historical volatility, Trade Van Information Services is 2.47 times less risky than Rafael Microelectronics. It trades about 0.32 of its potential returns per unit of risk. Rafael Microelectronics is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 12,900 in Rafael Microelectronics on November 4, 2024 and sell it today you would earn a total of 2,500 from holding Rafael Microelectronics or generate 19.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Trade Van Information Services vs. Rafael Microelectronics
Performance |
| Timeline |
| Trade Van Information |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Solid
| Rafael Microelectronics |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
Trade Van and Rafael Microelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Trade Van and Rafael Microelectronics
The main advantage of trading using opposite Trade Van and Rafael Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trade Van position performs unexpectedly, Rafael Microelectronics 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 Rafael Microelectronics will offset losses from the drop in Rafael Microelectronics' long position.The idea behind Trade Van Information Services and Rafael Microelectronics 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.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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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