Correlation Between EV Advanced and RF Materials

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

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

Diversification Opportunities for EV Advanced and RF Materials

0.63

Correlation Coefficient

EV Advanced  RF Materials

Poor diversification

The 3 months correlation between 131400 and 327260 is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding EV Advanced Material and RF Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RF Materials and EV Advanced 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 EV Advanced Material 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 EV Advanced i.e., EV Advanced and RF Materials go up and down completely randomly.

Pair Corralation between EV Advanced and RF Materials

Assuming the 90 days trading horizon EV Advanced Material is expected to generate 0.98 times more return on investment than RF Materials. However, EV Advanced Material is 1.02 times less risky than RF Materials. It trades about -0.06 of its potential returns per unit of risk. RF Materials Co is currently generating about -0.12 per unit of risk. If you would invest  228,000  in EV Advanced Material on September 19, 2024 and sell it today you would lose (34,300) from holding EV Advanced Material or give up 15.04% of portfolio value over 90 days.

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

EV Advanced Material  vs.  RF Materials Co

EV Advanced Material

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EV Advanced Material 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

RF Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RF Materials Co 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with EV Advanced and RF Materials

The main advantage of trading using opposite EV Advanced and RF Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EV Advanced 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 EV Advanced Material 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.