Correlation Between LEENO Industrial and RF Materials

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

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

Diversification Opportunities for LEENO Industrial and RF Materials

0.61

Correlation Coefficient

LEENO Industrial  RF Materials

Poor diversification

The 3 months correlation between LEENO and 327260 is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding LEENO Industrial and RF Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RF Materials and LEENO Industrial 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 LEENO Industrial 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 LEENO Industrial i.e., LEENO Industrial and RF Materials go up and down completely randomly.

Pair Corralation between LEENO Industrial and RF Materials

Assuming the 90 days trading horizon LEENO Industrial is expected to generate 3.56 times less return on investment than RF Materials. But when comparing it to its historical volatility, LEENO Industrial is 1.01 times less risky than RF Materials. It trades about 0.05 of its potential returns per unit of risk. RF Materials Co is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  472,500  in RF Materials Co on December 24, 2024 and sell it today you would earn a total of  174,500  from holding RF Materials Co or generate 36.93% return on investment over 90 days.

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

LEENO Industrial  vs.  RF Materials Co

LEENO Industrial

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LEENO Industrial are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, LEENO Industrial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

RF Materials

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RF Materials Co are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, RF Materials sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LEENO Industrial and RF Materials

The main advantage of trading using opposite LEENO Industrial and RF Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LEENO Industrial 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 LEENO Industrial 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.