Correlation Between Gs Retail and RF Materials

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

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

Diversification Opportunities for Gs Retail and RF Materials

-0.73

Correlation Coefficient

Gs Retail  RF Materials

Pay attention - limited upside

The 3 months correlation between 007070 and 327260 is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Gs Retail and RF Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RF Materials and Gs Retail 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 Gs Retail are associated (or correlated) with RF Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RF Materials has no effect on the direction of Gs Retail i.e., Gs Retail and RF Materials go up and down completely randomly.

Pair Corralation between Gs Retail and RF Materials

Assuming the 90 days trading horizon Gs Retail is expected to generate 0.15 times more return on investment than RF Materials. However, Gs Retail is 6.83 times less risky than RF Materials. It trades about 0.47 of its potential returns per unit of risk. RF Materials Co is currently generating about -0.25 per unit of risk. If you would invest  2,120,875  in Gs Retail on September 19, 2024 and sell it today you would earn a total of  194,125  from holding Gs Retail or generate 9.15% return on investment over 90 days.

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

Gs Retail  vs.  RF Materials Co

Gs Retail

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gs Retail are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Gs Retail is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

RF Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RF Materials Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Gs Retail and RF Materials

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

The idea behind Gs Retail and RF Materials 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.

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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.