Correlation Between RCL Foods and RMB Holdings
Can any of the company-specific risk be diversified away by investing in both RCL Foods and RMB Holdings 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 RCL Foods and RMB Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RCL Foods and RMB Holdings, you can compare the effects of market volatilities on RCL Foods and RMB Holdings 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 RCL Foods with a short position of RMB Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of RCL Foods and RMB Holdings.
Diversification Opportunities for RCL Foods and RMB Holdings
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between RCL and RMB is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding RCL Foods and RMB Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RMB Holdings and RCL Foods 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 RCL Foods are associated (or correlated) with RMB Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RMB Holdings has no effect on the direction of RCL Foods i.e., RCL Foods and RMB Holdings go up and down completely randomly.
Pair Corralation between RCL Foods and RMB Holdings
Assuming the 90 days trading horizon RCL Foods is expected to generate 26.84 times less return on investment than RMB Holdings. But when comparing it to its historical volatility, RCL Foods is 1.89 times less risky than RMB Holdings. It trades about 0.0 of its potential returns per unit of risk. RMB Holdings is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 4,100 in RMB Holdings on September 1, 2024 and sell it today you would earn a total of 100.00 from holding RMB Holdings or generate 2.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
RCL Foods vs. RMB Holdings
Performance |
| Timeline |
| RCL Foods |
| RMB Holdings |
RCL Foods and RMB Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RCL Foods and RMB Holdings
The main advantage of trading using opposite RCL Foods and RMB Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RCL Foods position performs unexpectedly, RMB Holdings 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 RMB Holdings will offset losses from the drop in RMB Holdings' long position.| RCL Foods vs. Frontier Transport Holdings | RCL Foods vs. City Lodge Hotels | RCL Foods vs. HomeChoice Investments | RCL Foods vs. Deneb Investments |
| RMB Holdings vs. ABSA Bank Limited | RMB Holdings vs. Capitec Bank Holdings | RMB Holdings vs. Standard Bank Group | RMB Holdings vs. Absa Group |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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