Correlation Between DB Insurance and RFTech

Can any of the company-specific risk be diversified away by investing in both DB Insurance and RFTech 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 DB Insurance and RFTech into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between DB Insurance Co and RFTech Co, you can compare the effects of market volatilities on DB Insurance and RFTech 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 DB Insurance with a short position of RFTech. Check out your portfolio center. Please also check ongoing floating volatility patterns of DB Insurance and RFTech.

Diversification Opportunities for DB Insurance and RFTech

0.44

Correlation Coefficient

DB Insurance  RFTech

Very weak diversification

The 3 months correlation between 005830 and RFTech is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding DB Insurance Co and RFTech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RFTech and DB Insurance 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 DB Insurance Co are associated (or correlated) with RFTech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RFTech has no effect on the direction of DB Insurance i.e., DB Insurance and RFTech go up and down completely randomly.

Pair Corralation between DB Insurance and RFTech

Assuming the 90 days trading horizon DB Insurance Co is expected to under-perform the RFTech. In addition to that, DB Insurance is 1.48 times more volatile than RFTech Co. It trades about -0.04 of its total potential returns per unit of risk. RFTech Co is currently generating about -0.01 per unit of volatility. If you would invest  343,500  in RFTech Co on August 31, 2024 and sell it today you would lose (8,000) from holding RFTech Co or give up 2.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

DB Insurance Co  vs.  RFTech Co

DB Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DB Insurance Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

RFTech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RFTech Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, RFTech is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with DB Insurance and RFTech

The main advantage of trading using opposite DB Insurance and RFTech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DB Insurance position performs unexpectedly, RFTech 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 RFTech will offset losses from the drop in RFTech's long position.

The idea behind DB Insurance Co and RFTech Co 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.