Correlation Between Cars and Radcom
Can any of the company-specific risk be diversified away by investing in both Cars and Radcom 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 Cars and Radcom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cars Inc and Radcom, you can compare the effects of market volatilities on Cars and Radcom 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 Cars with a short position of Radcom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cars and Radcom.
Diversification Opportunities for Cars and Radcom
Very good diversification
The 3 months correlation between Cars and Radcom is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Cars Inc and Radcom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Radcom and Cars 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 Cars Inc are associated (or correlated) with Radcom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Radcom has no effect on the direction of Cars i.e., Cars and Radcom go up and down completely randomly.
Pair Corralation between Cars and Radcom
Given the investment horizon of 90 days Cars Inc is expected to under-perform the Radcom. But the stock apears to be less risky and, when comparing its historical volatility, Cars Inc is 2.39 times less risky than Radcom. The stock trades about -0.4 of its potential returns per unit of risk. The Radcom is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 1,305 in Radcom on November 28, 2024 and sell it today you would lose (79.00) from holding Radcom or give up 6.05% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cars Inc vs. Radcom
Performance |
| Timeline |
| Cars Inc |
| Radcom |
Cars and Radcom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cars and Radcom
The main advantage of trading using opposite Cars and Radcom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cars position performs unexpectedly, Radcom 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 Radcom will offset losses from the drop in Radcom's long position.The idea behind Cars Inc and Radcom 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.| Radcom vs. Shenandoah Telecommunications Co | Radcom vs. Anterix | Radcom vs. SK Telecom Co | Radcom vs. Liberty Broadband Srs |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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