Correlation Between Tway Air and RFTech

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

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

Diversification Opportunities for Tway Air and RFTech

-0.78

Correlation Coefficient

Tway Air  RFTech

Pay attention - limited upside

The 3 months correlation between Tway and RFTech is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Tway Air Co and RFTech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RFTech and Tway Air 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 Tway Air 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 Tway Air i.e., Tway Air and RFTech go up and down completely randomly.

Pair Corralation between Tway Air and RFTech

Assuming the 90 days trading horizon Tway Air is expected to generate 1.43 times less return on investment than RFTech. In addition to that, Tway Air is 1.31 times more volatile than RFTech Co. It trades about 0.06 of its total potential returns per unit of risk. RFTech Co is currently generating about 0.12 per unit of volatility. If you would invest  304,000  in RFTech Co on October 24, 2024 and sell it today you would earn a total of  55,500  from holding RFTech Co or generate 18.26% return on investment over 90 days.

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

Tway Air Co  vs.  RFTech Co

Tway Air

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tway Air Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tway Air sustained solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Tway Air and RFTech

The main advantage of trading using opposite Tway Air and RFTech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tway Air 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 Tway Air 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.

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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..