Correlation Between RCABS and NN
Can any of the company-specific risk be diversified away by investing in both RCABS and NN 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 RCABS and NN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RCABS Inc and NN Inc, you can compare the effects of market volatilities on RCABS and NN 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 RCABS with a short position of NN. Check out your portfolio center. Please also check ongoing floating volatility patterns of RCABS and NN.
Diversification Opportunities for RCABS and NN
Good diversification
The 3 months correlation between RCABS and NN is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding RCABS Inc and NN Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NN Inc and RCABS 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 RCABS Inc are associated (or correlated) with NN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NN Inc has no effect on the direction of RCABS i.e., RCABS and NN go up and down completely randomly.
Pair Corralation between RCABS and NN
Given the investment horizon of 90 days RCABS Inc is expected to generate 4.21 times more return on investment than NN. However, RCABS is 4.21 times more volatile than NN Inc. It trades about 0.1 of its potential returns per unit of risk. NN Inc is currently generating about 0.23 per unit of risk. If you would invest 0.09 in RCABS Inc on September 13, 2024 and sell it today you would earn a total of 0.01 from holding RCABS Inc or generate 11.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
RCABS Inc vs. NN Inc
Performance |
| Timeline |
| RCABS Inc |
| NN Inc |
RCABS and NN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RCABS and NN
The main advantage of trading using opposite RCABS and NN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RCABS position performs unexpectedly, NN 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 NN will offset losses from the drop in NN's long position.| RCABS vs. Arca Continental SAB | RCABS vs. Becle SA de | RCABS vs. Aquagold International | RCABS vs. Morningstar Unconstrained Allocation |
| NN vs. Steel Partners Holdings | NN vs. Compass Diversified | NN vs. Brookfield Business Partners | NN vs. Matthews International |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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