Correlation Between Seoam Machinery and RFTech

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

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

Diversification Opportunities for Seoam Machinery and RFTech

-0.56

Correlation Coefficient

Seoam Machinery  RFTech

Excellent diversification

The 3 months correlation between Seoam and RFTech is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Seoam Machinery Industry and RFTech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RFTech and Seoam Machinery 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 Seoam Machinery Industry 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 Seoam Machinery i.e., Seoam Machinery and RFTech go up and down completely randomly.

Pair Corralation between Seoam Machinery and RFTech

Assuming the 90 days trading horizon Seoam Machinery Industry is expected to under-perform the RFTech. In addition to that, Seoam Machinery is 1.44 times more volatile than RFTech Co. It trades about -0.01 of its total potential returns per unit of risk. RFTech Co is currently generating about 0.0 per unit of volatility. If you would invest  385,500  in RFTech Co on October 12, 2024 and sell it today you would lose (10,500) from holding RFTech Co or give up 2.72% of portfolio value over 90 days.

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

Seoam Machinery Industry  vs.  RFTech Co

Seoam Machinery Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seoam Machinery Industry has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Seoam Machinery is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

RFTech

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RFTech Co are ranked lower than 10 (%) 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 Seoam Machinery and RFTech

The main advantage of trading using opposite Seoam Machinery and RFTech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seoam Machinery 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 Seoam Machinery Industry 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.