Correlation Between Rmb International and Rmb Mendon
Can any of the company-specific risk be diversified away by investing in both Rmb International and Rmb Mendon 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 Rmb International and Rmb Mendon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rmb International Fund and Rmb Mendon Financial, you can compare the effects of market volatilities on Rmb International and Rmb Mendon 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 Rmb International with a short position of Rmb Mendon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rmb International and Rmb Mendon.
Diversification Opportunities for Rmb International and Rmb Mendon
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Rmb and Rmb is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Rmb International Fund and Rmb Mendon Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rmb Mendon Financial and Rmb International 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 Rmb International Fund are associated (or correlated) with Rmb Mendon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rmb Mendon Financial has no effect on the direction of Rmb International i.e., Rmb International and Rmb Mendon go up and down completely randomly.
Pair Corralation between Rmb International and Rmb Mendon
Assuming the 90 days horizon Rmb International Fund is expected to under-perform the Rmb Mendon. But the mutual fund apears to be less risky and, when comparing its historical volatility, Rmb International Fund is 3.37 times less risky than Rmb Mendon. The mutual fund trades about -0.29 of its potential returns per unit of risk. The Rmb Mendon Financial is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 4,952 in Rmb Mendon Financial on August 26, 2024 and sell it today you would earn a total of 634.00 from holding Rmb Mendon Financial or generate 12.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rmb International Fund vs. Rmb Mendon Financial
Performance |
| Timeline |
| Rmb International |
| Rmb Mendon Financial |
Rmb International and Rmb Mendon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rmb International and Rmb Mendon
The main advantage of trading using opposite Rmb International and Rmb Mendon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rmb International position performs unexpectedly, Rmb Mendon 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 Mendon will offset losses from the drop in Rmb Mendon's long position.| Rmb International vs. Rmb Small Cap | Rmb International vs. Rmb Fund A | Rmb International vs. Rmb Fund I | Rmb International vs. Rmb Fund C |
| Rmb Mendon vs. Rmb Small Cap | Rmb Mendon vs. Rmb Fund A | Rmb Mendon vs. Rmb Fund I | Rmb Mendon vs. Rmb Fund C |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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