Correlation Between Obayashi and RCM Technologies
Can any of the company-specific risk be diversified away by investing in both Obayashi and RCM Technologies 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 Obayashi and RCM Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Obayashi and RCM Technologies, you can compare the effects of market volatilities on Obayashi and RCM Technologies 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 Obayashi with a short position of RCM Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Obayashi and RCM Technologies.
Diversification Opportunities for Obayashi and RCM Technologies
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Obayashi and RCM is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Obayashi and RCM Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCM Technologies and Obayashi 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 Obayashi are associated (or correlated) with RCM Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RCM Technologies has no effect on the direction of Obayashi i.e., Obayashi and RCM Technologies go up and down completely randomly.
Pair Corralation between Obayashi and RCM Technologies
Assuming the 90 days horizon Obayashi is expected to generate 1.19 times less return on investment than RCM Technologies. But when comparing it to its historical volatility, Obayashi is 1.72 times less risky than RCM Technologies. It trades about 0.08 of its potential returns per unit of risk. RCM Technologies is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,290 in RCM Technologies on September 28, 2024 and sell it today you would earn a total of 1,007 from holding RCM Technologies or generate 78.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Obayashi vs. RCM Technologies
Performance |
| Timeline |
| Obayashi |
| RCM Technologies |
Obayashi and RCM Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Obayashi and RCM Technologies
The main advantage of trading using opposite Obayashi and RCM Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Obayashi position performs unexpectedly, RCM Technologies 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 RCM Technologies will offset losses from the drop in RCM Technologies' long position.| Obayashi vs. Watsco Inc | Obayashi vs. Fastenal Company | Obayashi vs. SiteOne Landscape Supply | Obayashi vs. Ferguson Plc |
| RCM Technologies vs. Matthews International | RCM Technologies vs. Mammoth Energy Services | RCM Technologies vs. Griffon | RCM Technologies vs. Steel Partners Holdings |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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