Correlation Between RPC and Now
Can any of the company-specific risk be diversified away by investing in both RPC and Now 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 RPC and Now into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RPC Inc and Now Inc, you can compare the effects of market volatilities on RPC and Now 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 RPC with a short position of Now. Check out your portfolio center. Please also check ongoing floating volatility patterns of RPC and Now.
Diversification Opportunities for RPC and Now
Average diversification
The 3 months correlation between RPC and Now is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding RPC Inc and Now Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Now Inc and RPC 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 RPC Inc are associated (or correlated) with Now. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Now Inc has no effect on the direction of RPC i.e., RPC and Now go up and down completely randomly.
Pair Corralation between RPC and Now
Considering the 90-day investment horizon RPC Inc is expected to generate 1.12 times more return on investment than Now. However, RPC is 1.12 times more volatile than Now Inc. It trades about 0.8 of its potential returns per unit of risk. Now Inc is currently generating about 0.15 per unit of risk. If you would invest 565.00 in RPC Inc on October 20, 2024 and sell it today you would earn a total of 136.00 from holding RPC Inc or generate 24.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
RPC Inc vs. Now Inc
Performance |
| Timeline |
| RPC Inc |
| Now Inc |
RPC and Now Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RPC and Now
The main advantage of trading using opposite RPC and Now positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RPC position performs unexpectedly, Now 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 Now will offset losses from the drop in Now's long position.The idea behind RPC Inc and Now 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.| Now vs. Oil States International | Now vs. Oceaneering International | Now vs. Geospace Technologies | Now vs. Enerflex |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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