Correlation Between Itron and RCABS
Can any of the company-specific risk be diversified away by investing in both Itron and RCABS 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 Itron and RCABS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Itron Inc and RCABS Inc, you can compare the effects of market volatilities on Itron and RCABS 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 Itron with a short position of RCABS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Itron and RCABS.
Diversification Opportunities for Itron and RCABS
Pay attention - limited upside
The 3 months correlation between Itron and RCABS is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Itron Inc and RCABS Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCABS Inc and Itron 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 Itron Inc are associated (or correlated) with RCABS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RCABS Inc has no effect on the direction of Itron i.e., Itron and RCABS go up and down completely randomly.
Pair Corralation between Itron and RCABS
Given the investment horizon of 90 days Itron Inc is expected to generate 0.25 times more return on investment than RCABS. However, Itron Inc is 4.0 times less risky than RCABS. It trades about 0.29 of its potential returns per unit of risk. RCABS Inc is currently generating about -0.08 per unit of risk. If you would invest 10,386 in Itron Inc on August 31, 2024 and sell it today you would earn a total of 1,543 from holding Itron Inc or generate 14.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Itron Inc vs. RCABS Inc
Performance |
| Timeline |
| Itron Inc |
| RCABS Inc |
Itron and RCABS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Itron and RCABS
The main advantage of trading using opposite Itron and RCABS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Itron position performs unexpectedly, RCABS 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 RCABS will offset losses from the drop in RCABS's long position.The idea behind Itron Inc and RCABS Inc 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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