Correlation Between RFTech and Aloys

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

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

Diversification Opportunities for RFTech and Aloys

-0.89

Correlation Coefficient

RFTech  Aloys

Pay attention - limited upside

The 3 months correlation between RFTech and Aloys is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding RFTech Co and Aloys Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aloys Inc and RFTech 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 RFTech Co are associated (or correlated) with Aloys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aloys Inc has no effect on the direction of RFTech i.e., RFTech and Aloys go up and down completely randomly.

Pair Corralation between RFTech and Aloys

Assuming the 90 days trading horizon RFTech Co is expected to generate 0.67 times more return on investment than Aloys. However, RFTech Co is 1.5 times less risky than Aloys. It trades about -0.03 of its potential returns per unit of risk. Aloys Inc is currently generating about -0.04 per unit of risk. If you would invest  541,000  in RFTech Co on October 5, 2024 and sell it today you would lose (165,000) from holding RFTech Co or give up 30.5% of portfolio value over 90 days.

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

RFTech Co  vs.  Aloys Inc

RFTech

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RFTech Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, RFTech sustained solid returns over the last few months and may actually be approaching a breakup point.

Aloys Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aloys Inc 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with RFTech and Aloys

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

The idea behind RFTech Co and Aloys 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.

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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.