Correlation Between CN MODERN and RCM TECHNOLOGIES

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

By analyzing existing cross correlation between CN MODERN DAIRY and RCM TECHNOLOGIES, you can compare the effects of market volatilities on CN MODERN and RCM TECHNOLOGIES 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 CN MODERN with a short position of RCM TECHNOLOGIES. Check out your portfolio center. Please also check ongoing floating volatility patterns of CN MODERN and RCM TECHNOLOGIES.

Diversification Opportunities for CN MODERN and RCM TECHNOLOGIES

0.21

Correlation Coefficient

CN MODERN  RCM TECHNOLOGIES

Modest diversification

The 3 months correlation between 07M and RCM is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding CN MODERN DAIRY and RCM TECHNOLOGIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCM TECHNOLOGIES and CN MODERN 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 CN MODERN DAIRY are associated (or correlated) with RCM TECHNOLOGIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RCM TECHNOLOGIES has no effect on the direction of CN MODERN i.e., CN MODERN and RCM TECHNOLOGIES go up and down completely randomly.

Pair Corralation between CN MODERN and RCM TECHNOLOGIES

Assuming the 90 days trading horizon CN MODERN DAIRY is expected to under-perform the RCM TECHNOLOGIES. In addition to that, CN MODERN is 1.41 times more volatile than RCM TECHNOLOGIES. It trades about -0.02 of its total potential returns per unit of risk. RCM TECHNOLOGIES is currently generating about 0.14 per unit of volatility. If you would invest  1,810  in RCM TECHNOLOGIES on October 6, 2024 and sell it today you would earn a total of  350.00  from holding RCM TECHNOLOGIES or generate 19.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	85.0%
Values	Daily Returns

CN MODERN DAIRY  vs.  RCM TECHNOLOGIES

CN MODERN DAIRY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CN MODERN DAIRY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, CN MODERN is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

RCM TECHNOLOGIES

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days RCM TECHNOLOGIES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather uncertain basic indicators, RCM TECHNOLOGIES exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CN MODERN and RCM TECHNOLOGIES

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

The idea behind CN MODERN DAIRY and RCM TECHNOLOGIES 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.