Correlation Between CKM Building and Rafael Microelectronics
Can any of the company-specific risk be diversified away by investing in both CKM Building 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 CKM Building and Rafael Microelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CKM Building Material and Rafael Microelectronics, you can compare the effects of market volatilities on CKM Building 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 CKM Building with a short position of Rafael Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of CKM Building and Rafael Microelectronics.
Diversification Opportunities for CKM Building and Rafael Microelectronics
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CKM and Rafael is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding CKM Building Material and Rafael Microelectronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rafael Microelectronics and CKM Building 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 CKM Building Material 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 CKM Building i.e., CKM Building and Rafael Microelectronics go up and down completely randomly.
Pair Corralation between CKM Building and Rafael Microelectronics
Assuming the 90 days trading horizon CKM Building is expected to generate 7.15 times less return on investment than Rafael Microelectronics. But when comparing it to its historical volatility, CKM Building Material is 2.63 times less risky than Rafael Microelectronics. It trades about 0.17 of its potential returns per unit of risk. Rafael Microelectronics is currently generating about 0.46 of returns per unit of risk over similar time horizon. If you would invest 11,850 in Rafael Microelectronics on November 4, 2024 and sell it today you would earn a total of 3,550 from holding Rafael Microelectronics or generate 29.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CKM Building Material vs. Rafael Microelectronics
Performance |
| Timeline |
| CKM Building Material |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
| Rafael Microelectronics |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
CKM Building and Rafael Microelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CKM Building and Rafael Microelectronics
The main advantage of trading using opposite CKM Building and Rafael Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CKM Building 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 CKM Building Material 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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